Gateway Required?

[Andy the Actuary]

A profit sharing plan will be tested for discrimination on a contributions basis under 401(a)(4) because the plan sponsor does not want to contribute the gateway. There are two tests:

(1) The ratio test that considers rate groups (based upon contribution rates) taking into consideration only the plan being tested and

(2) The overall average benefits rate test for the group being tested taking into consideration contributions allocated under certain other DC Plans.

Am I correct that conducting the average benefits rate test (2) on a benefits basis does not require a gateway contribution? That is, the gateway contribution is requried only if rate groups are to be determined on a benefits basis

[Mike Preston]

You are correct.

[Andy the Actuary]

You are correct.

Thank you. It was clear that 410(b) has nothing to do with cross testing but it was subtle that 401(4)'s application of 410(b) escaped the gateway when testing on a benefits basis. I was unable to locate confirmation in The ERISA Outline Book.