Safe Harbor for Controlled Group

[Guest Suanne]

Two members of a controlled group are participating employers in the same plan. One member of the controlled group would like to give a 3 1/2 % safe harbor non-discretionary contribution, while the other member wants to stay with the standard 3%. Is this okay? Would it require that the members pass coverage separately, or that otherwise, it be tested under 401(a)(4)?

[Blinky the 3-eyed Fish]

You have the right idea. You could divide the groups into component plans and see if each group could pass coverage separately. If so, then you have 2 safe harbor formulas within each component and no general testing is required. If you can't accomplish that, like you said, the general test is needed.