Coverage testing and HCE determination

[Guest JBeck]

If two companies are part of a controlled group and both have separate 401(k) plans, in determining the coverage test for each, it may be beneficial to limit the number of HCEs to the top 20 percent. Does the plan have to have this limit for me to do so, or is coverage testing a separate issue, and the top 20 percent limit elected administratively for coverage purposes.

[Blinky the 3-eyed Fish]

GUST documents require that the top paid election be hard-coded into the document. You will need an amendment if it is not there currently. Be careful as to when you amend the plan as it might be considered a cutback. There have been discussions on the cutback issue on these boards.