Non-Discrimination testing of carved-out DB plan.

[flosfur]

An employer maintains a non-safe harbor DB & a safe harbor DC plan with no common participants. Both plans separately pass the 401(a)(26) and 410(b).

DB plan is a non-safe harbor plan and is to be tested for non-discrimination without aggregating with the DC plan.

In computing the rate groups's ratio percentages and the average benefit %, are the non-excludable employees who are not in the DB plan taken into account with zero accruals? S1.401(a)(4)(2)©(3)(i) says they must.

I am being told they don't need to because:

"Since the MPP is a safe-harbor plan (and passes testing) and the DBP passes non-discrimination testing, then the 2 plans are broadly available separate plans."

The DB passes the 401(a)(4) if only DB participants were taken into account.

[AndyH]

Sure.

What does the MPP plan have to do with it? If it is not being aggregated, nothing. Would they be in the general test with a 0% if there was only a DB plan?

What you are being told does not compute.

[Blinky the 3-eyed Fish]

Broadly available is a term related to satisfying the gateway requirements. That is not an issue here.

When determining the rate groups, of course no MP contributions are considered and those nonexcludables with no DB will have a 0% accrual rate. But for computing the avg benefit ratio, you are going to include the MP contributions.

[AndyH]

Unless you choose to invoke 1.410(b)-(5)(e)(3) in which case you do not have to include the MP at all.

Ha, just happened to have that out!

[Blinky the 3-eyed Fish]

Touche, Mr. Peanut.

[JAY21]

Andy's invokation (amen) appears to require that DB benefits get tested on a benefits basis (not contribution basis) and that the other plan type (DC) are tested on a contribution basis (not cross-tested to benefits basis), is that correct ? I guess that's a trade-off that works in some situations but not in others (e.g., where you want to cross-test one of the plans).

[AndyH]

right. Nice power word, don't you think?

Still haven't figured out the peanut reference yet, though. The AC in Blinky's trailer must be broke.

[Blinky the 3-eyed Fish]

There are a couple of quarters sitting on top of it, so broke? I think not.