Early Retirement Window & Non-Discrimination Testing

[LIBOR]

A safe harbor plan is amended to include an early retirement window; wrt (a)(4) testing , is there anything that prohibits you from defining 2 component plans : (1)one that is safe harbor, includes participants not eligible for the window, and by design wouldn't require general testing and (2) another that includes only those eligible for the window and assuming the window is not safe harbor would require a general test ????

Also, the plan as amended for the window would have to pass coverage or 410(b) I assume ?? a component plan breakout wouldn't be available for coverage testing would it ??

[Guest Doug Goelz]

A couple of comments:

In general, there is no written requirement that a window benefit satisfy the 410(b) minimum coverage regulations. However, the 401(a)(4) rules could end up requiring the window-eligible group to pass the 410(b) rules.

You can restructure the plan into component plans to retain safe harbor status. However, each component plan must satisfy the 410(b) rules in order for the plan plus the window benefit to satisfy the 401(a)(4) rules.

If the plan is integrated, you may fail 401(l) due to the window benefit for the window-eligible component plan. In the case where one of the component plans does not satisfy a safe harbor, you may use the general test for that component plan and still rely on the safe harbor for the other component plan. (Alternatively, you can general test the entire plan without using component plans.)