BRF Testing

[justatester]

Hi,

I know I have asked this question in some manner before, but I am still having a tough time with this topic.

Plan with multiple match formulas:

Group 1: 50% up to 6%

Group 2: 50% up to 4%

Group 3: 10% up to 8%

Group 4: 50% up to 4%, plus 25% on next 2%

Group 5: No Match

For BRF, would I run the test as such-

Group 5 by itselft

Groups 1&2

Groups 1&4

Group 1

Group 3

Does this make sense?

Thanks for your help!

[Tom Poje]

you have 4 formulas so I'd say you have 4 BRF tests, one for each formula.

certainly someone in group 1 wouldn't do any better if he was in group 2, but the same could be said for someone in group 4 - they wouldn't do any better if they were in group 2 either.

in other words, when looking at group 2, I think you would treat anyone from group 1, 2 and 4 as 'benefitting'.

[justatester]

So just to clarify

The following would be the groups:

When testing formula/group 1: It will include group 1

When testing formua/group 2: It will include groups 1, 2, 4

When tesitng formula/group 3: It will include group 3

When testing formula/group 4: It will include 1, 4

Do I have it correct?

[justatester]

Also, if one of the formulas fail, and an amendent is made to increase the matching level for another group, what type of contribution should it be? Does it have to be 100% Vested?

[Guest Sieve]

You also can restructure the plan under Treas. Reg. Section 1.401(a)(4)-9© to test the matches as a BRF, e.g. into the following groups:

1) 10% on first 4% (everyone falls into this group)

2) additional 40% on 1st 4%

3) 10% on 4-6%

4) additional 15% on 4-6%

4) additional 25% on 4-6%

5) 10% on 6-8%

Each group includes everyone eligible to receive that match, so participants may be in multiple groups.

[Jim Chad]

I just want to confirm something really basic. Is this outline correct?

Once you have your employee groups figured out, the algebra in BRF testing is the same as coverage testing.

First the Ratio Percentage test, must be at least 70%.

If that fails you do all parts of the Average benefits test, like in coverage;

Both Nondiscriminatory Classification Requirement and Average Benefits Percentage Test

(The Nondiscriminatory Classification Requirement can be passed with either the Safe Harbor Percentage Test or -----using Facts and Circumstances and the Unsafe Harbor Percentage Test & classification is non discriminatory based on facts and circumstances)

Is this outline correct?

[Tom Poje]

In my copy of the regs (just for kicks) I added the following under 1.401(a)(4)-4(b)(1) without regard to the average benefit percentage test of 1.410(b)-5.

seriously, there is no avg ben % test under BRF testing. one of those strange rules. or at least that was what was beat into my head years ago.

[Jim Chad]

Thanks, Tom