discrimination testing of multiemployer plans.

[Guest hcluthe]

Is there an annual choice between testing by bargaining agreement or testing all agreements together? Or does one have to test the same way each year?

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[KJohnson]

I assume your talking about ADP since that is about the only thing you would test in a multi that doesn't benefit any non collectively bargained. I think the answer is you have to be "reasonably consistent" this is from the regs:

B) Plans benefiting collective bargaining unit employees. A plan

that benefits employees who are included in a unit of employees covered

by a collective bargaining agreement and employees who are not included

in such a collective bargaining unit is treated as comprising separate

plans. This paragraph (g)(11)(ii)(B) is generally applied separately

with respect to each collective bargaining unit. At the option of the

employer, however, two or more separate collective bargaining units can

be treated as a single collective bargaining unit, provided that the

combinations of units are determined on a basis that is reasonable and

reasonably consistent from year to year. Thus, for example, if a plan

benefits employees in three categories--employees included in collective

bargaining unit A, employees included in collective bargaining unit B,

and employees who are not included in any collective bargaining unit--

the plan can be treated as comprising three separate plans, each of

which benefits only one category of employees. However, if collective

bargaining units A and B are treated as a single collective bargaining

unit, the plan will be treated as comprising only two separate plans,

one benefiting all employees who are included in a collective bargaining

unit and another benefiting all other employees. Similarly, if a plan

benefits only employees who are included in collective bargaining unit A

and employees who are included in collective bargaining unit B, the plan

can be treated as comprising two separate plans. However, if collective

bargaining units A and B are treated as a single collective bargaining

unit, the plan will be treated as a single plan. An employee is treated

as included in a unit of employees covered by a collective bargaining

agreement if and only if the employee is a collectively bargained

employee within the meaning of Sec. 1.410(b)-6(d)(2).

© Multiemployer plans. Consistent with section 413(b), the portion

of the plan that is maintained pursuant to a collective bargaining

agreement (within the meaning of Sec. 1.413-1(a)(2)) is treated as a

single plan maintained by a single employer that employs all the

employees benefiting under the same benefit computation formula and

covered pursuant to that collective bargaining agreement. The rules of

paragraph (g)(11)(ii)(B) of this section (including the optional

aggregation of collective bargaining units) apply to the resulting

deemed single plan in the same manner as they would to a single employer

plan, except that the plan administrator is substituted for the employer

where appropriate and appropriate fiduciary obligations are taken into

account. The noncollectively bargained portion of the plan is treated as

maintained by one or more employers, depending on whether the

noncollective bargaining unit employees who benefit under the plan are

employed by one or more employers.

[Guest hcluthe]

This question applies only to collectively bargained employees and not to non-union employees. For the previous 3 years we have tested by bargaining agreement but this year it seems the corrective distributions are less when we test all the agreements together. Is it unreasonable to use the aggregate test results when the refunds are less? I think not. But what happens if the reverse is true for next year. Then we're back to the reasonableness of switching from year to year and your answer frowns on that.

So, I guess we're stuck with the disaggregated tests even though the refunds are larger.

thank you!

[KJohnson]

I think your instincts are correct. I would think the IRS would have a problem with you changing from year to year solely on the basis of how much your refunds are going to be. The "refund" to the HCE is the "penalty" for not having enough NHCE's deferring. Thus, changing from year to year to solely benefit HCEs is not something that the IRS is likely to view in the most favorable of light. I don't know of any formal or informal guidance, however, on what "reasonably consistent" means.