Non-discrimination questions

[FAPInJax]

The compensation ratio test is required when total compensation is not used. A client has questioned whether this test is to be performed on an annual basis (for example looking at 2004 compensation) OR be performed on the testing compensation (for example the 3 year average compensation).

My reading is that it is only an annual basis number. Anyone disagree??

An additional question on imputing permitted disparity. A DB and DC plan are being combined for testing purposes. Permitted disparity may only be imputed once. I can not find any rules outlining which plan must be primary (if any) or whether the maximum under either plan can be used, etc. Any comments???

I would think that using the maximum permitted disparity under either plan would be OK.

[AndyH]

I think you are right, but keep in mind that the plan can be tested under the general test in lieu of a 414(s) test. And under certain conditions the general test can be done every three years only.

The integration can be done under either plan. I'm not sure if you could split the disparity limits 50%/50% among DC and DB plans. You probably could.

If Blinky agrees you can impress your client by quoting both quint the shark hunter and Blinky the 3-Eyed Fish. TAG would certainly be impressed.

[FAPInJax]

Thanks for the comments about the 414s test. I had forgotten that I could just go under 401(a)(4) and test. I will have to check that option out.

I guess I was wondering whether there was any 'magic' choice to decide whether to impute the disparity in the DB or the DC (provided of course that the employee is actually in both plans). A consistency requirement seems to be hidden - obviously you could not choose the highest imputed disparity for the NHCE and the lowest for the HCEs.

[Lori Friedman]

you can impress your client by quoting both quint the shark hunter and Blinky the 3-Eyed Fish

I frequently quote Quint and Blinky, usually in client memoranda and position papers. I often refer to them collectively as "The Gill Guys".

[could be me maybe not]

Blinky and GBurns have both been absent recently. Hmmmm.

[GBurns]

I am still here. I usually only post when I have some thing of value to add or a question to ask. Others have been answering with great expertise etc and I have understood the post and had no questions.

But, it seems that I might be missed by a few, so I will look for more opportunities.

Now that you have caused me to post JanetM might not like you so much any more.

[JanetM]

GBurns that was harsh. could be maybe not was just making an observation. I too noted you and Blinky were not posting.

I ususally enjoy your posts..... but that was a bit harsh.

[GBurns]

I thought that you might have needed some make up exercise in honing your hostility (as per 1 of your posts) since I seemed to have been deficient recently.

I thought could be was celebrating. Could be? Maybe not.

[JanetM]

Yes, I did post that after a vicious posting you made. The written repartee is amusing sometimes if it doesn't get out of hand.

[Lori Friedman]

Blinky's away from his office this week. He should be back, in all his 3-eyed glory, sometime next week.

[Guest merlin]

Frank,

I don't think you can "split" the treatment of the permitted disparity. Once you decide how you're going to test the aggregated plan, i.e. on benefits or contributions, that will dictate how you handle the disparity. See 1.401(a)(4)-9(b)(2)(B)(iii).

[FAPInJax]

Thanks for all the replies.

Merlin - the issue is not whether to test on benefits or contributions BUT if a participant is in 2 plans (DB / DC). The decision to test benefits or contributions is usually pretty cut and dried (not always but usually). Is there an advantage to imputing disparity in the DB versus the DC (or the other way around??)??

Can I cherry pick (or the fruit of your choice) that this employee will have imputed disparity done in the DC versus that employee in the DB?? (Assuming the 2 employees are in both plans)

[Guest merlin]

Frank, I read your initial post to say that you were aggregating the two plans for testing. Sorry.