Non discrimination compensation in controlled group

[Gary]

I have a husband and wife who fully own two companies.

One company sponsors a safe harbor 401k plan and the other company sponsors a DBP.

The husband and wife receive compensation from both companies and their one employee only receives compensation from the company that sponsors the 401k plan.

In performing the non discrimination testing it appears to me that the husband and wife should have their compensation combined for ND testing.

So for example if one of them accrues a DB accrual of $5,000 in the plan's first year and the owner earned $100,000 from each company then it seems for ND testing the accrual rate is 2.5% (5,000/200,000) as opposed to 5% (5,000/100,000).

Is that correct?

Of course the DBP plan formula can be based on compensation from the one company.

Thanks.

[Gary]

One more comment.

The plans are aggregated for purposes of ND testing as the client does not want the employee to participate in the DBP. If they were tested separately then I suppose the compensation would not need to be combined.

Thanks.