k/m testing union + nonunion employees

[LCARUSI]

I want to be sure I understand my options with respect to k/m testing on a plan covering both union and nonunion employees:

1) I assume I can ignore the union/nonunion issue and test it as a single plan.

2) Can I perform a k/m test for the nonunion group and a separate k/m test for the union group?

3) Can I perform a k/m test for the nonunion group and ignore the test for the union group?

If I have any or all of the above options, can I choose the most favorable and can I switch from year to year?

Thanks for any input you can provide.

[Tom Poje]

Test separately, union and nonunion. same goes for 410(B).

If there is more than 1 union group covered you may combine the unions or test separately

see 1.401(k)-1(g)(11)(ii)(B)

if ee shifts from union to non union count only deferrals for that portion ee was union/non union.

if no union ees are HCE, you automatically pass

if fail to correct ADP test violation, deferrals of union ees are not excluded from income

real strange- ACP is deemed to pass even if HCEs are included in that portion of the plan 1.401(m)-1(a)(3) This rule does not apply to the nonunion portion of the plan

[david shipp]

For both (k) and (m) testing, the definition of "plan" is found in 1.401(k)-1(g)(11). Under that definition, (ii)(B) deals with plans covering collectively bargained employees. It provides that the portion of the plan covering bargained employees must be disaggregated from the portion covering non-bargained employees. Further, if the plan covers employees of several bargaining units, the sponsor may decide to aggregate or dissagregate those bargaining units at its option.

The result is that the (k) test must be performed separately for each "plan." Thus, the non-bargained group must be tested separately from the bargained group and the sponsor has the option on how to test within the bargained group if there are multiple units covered.

The ADP test is required for two purposes, to satisfy 401(a)(4) and to qualify the CODA. Since cba plans are deemed to satisfy 401(a)(4) if the plan automatically satisfies 410(B) [see 1.401(a)(4)-1©(5)], section 1.401(k)-1(a)(7) provides that, where a CODA fails the ADP test, the nonqualified CODA will still be treated as satisfying 401(a)(4), but the cba employees will be taxed on their deferrals (assuming the failure isn't corrected).

For (m) testing purposes, since there is no CODA issue, the test would only be required to meet 401(a)(4). Since cba plans are deemed to meet 401(a)(4), the cba portion of a plan is treated as meeting the ACP test and there is no need to test it. (1.401(m)-1(a)(3))

Of course, the non-bargained portion of the plan must still be tested.

Hope this is helpful.