Testing methodology?

[Guest cosmo1215]

Does the testing methodology need to be stated within the plan document for plans which demonstrate compliance with IRC 401(a)(4) via "cross-testing"?

Thanks

[wmyer]

No, the plan document does not need to state the interest rate used, the actuarial assumptions, whether permitted disparity is imputed, whether the One-Third Gateway or 5% Gateway is used, etc....

[Tom Poje]

if plan was to test using SSRA then it is strongly recomended you get an approval letter and get the language in the document for that testing assumption. otherwise you have to use NRD.

a plan should have language for the gateway - you can't simply bump someone up to the 1/3 or 5% allocation rate. the document doesn't have to say 'we will only use 5% or we will only use 1/3

[Guest cosmo1215]

I agree Tom, but I thought that the IRS would kick back the document if it did not contain the testing methodology. If the methodology could affect the way the contributions within a DC plan are allocated, doesn't this have to be stated? Especially give the fact that the gateway requirements must be met before you can even cross-test.

Any thoughts?

[AndyH]

cosmo, you are mixing two things that are apples and oranges.

Allocations and the method of allocating contributions are apples.

Testing methodology used to prove that such allocations are nondiscriminatory are oranges.

All plans must have apples. Well written plans do not have oranges.