Discrimination Testing and POP Plans

[Guest Kristine]

We write POP Plans and then the client typically runs their own Discrimination Tests. I now have a client wh woudl like us it do the tests for them. I have never done testing on a POP Plan... Any suggestions, comments, ideas of how to do this??

[J Simmons]

Determine which employees are 'key employees' (determination may have already been made if they had a top-heavy status determination for a qualified retirement plan). Then determine if the POP premiums of the key employee group total more than 1/3 of the total of such premiums for the non-key employee group.

[Jacmo]

There are a number of different tests to run. Best bet is to subscribe to a tax/law service, such as EBIA, and get their 125 manual. It will tell you how to run tests.

Another option: Research these archives.

To J Simmons--I think you may be referring to the 25% test. (I don't know of a 1/3rd test). The 25% test states that key employees shall pretax no more than 25% of all dollars being pre-taxed by all employees. Thus the formula would read "K over K+N = 25% or less" where K is the total dollars being pre-taxed by key employees and N is the total dollars being pre-taxed by non-key employees.

This is just one of several tests.