testing 2 plans separately to pass 410(b)

[Guest dubya]

I understand that for an employer who sponsors 2 401k plans, you test under 410(b) to determine if the plans pass 410(b) separately. If not, they are combined, and then it follows that other non-discrimination tests are tested on a combined basis.

But when testing under 410(b), these 401(k) plans have at least 3 components - non-elective contributions, elective deferrals, and employer match contributions. So, to see if the Plan #1 passes separately, you would test all 3 of these components separately. You would then do the same for Plan #2. What if the elective deferral component of each plan passes 410(b) separately but the other 2 components do not pass separately? Would you still be able to perform the 401(k) test separately for each plan? Or is it the case that all components must pass separately in order for the plans to test other non-discrimination tests separately?

Thanks for your comments.

[Tom Poje]

you are correct, step 1, mandatorilly disagregate the 'plan' into 3 'plans'

1. 401 k

2. 401 m

3. nonelective

now you begin testing

you have your choice you can permissively aggregate the two 401ks for coverage - but if you do you run 1 ADP test withh all employees.

there are some special rules if an HCE particpates in both plans.

there is nothing to prevent you from permissively aggregating the 401k feature and not permissively aggregating the other features (or vice versa)

but certaing nondiscrim options get tossed out (e.g. shifting deferrals to match) since you can only 'compare apples to apples'

[Guest dubya]

Tom,

Plan A has the HCE's while Plan B has no HCE's. Also, Plan B has poor 401k and 401m participation. As a result it would be beneficial to not aggregate the plans for the ADP and ACP tests. However, I am pretty sure that the plan with HCE's will fail 410(b), at least for non-elective contributions. So, are you saying that if the plans pass 410(b) separately for the elective deferrals and the match, but must be aggregated for the non-elective, then we could still run the ADP and ACP tests separately since those components pass 410(b) separately?

Thanks

[Tom Poje]

yes. I dont have a site per se but if you look at 8.82 ERISA Outline Book it would certainly imply that. (2003 edition)