Coverage - Aggregation of 401(k), 401(m) and QNEC

[Guest Rags]

Is there any scenario under which the contributions made under 401(k), 401(m) and employer QNECS can be aggregated for coverage testing (contrary to 1.410(b)-7©)?

Division 1/ Plan A has 401k and 401m contributions.

Division 2/ Plan B has 401k, 401m and QNEC.

Division 3/ Plan C offers only a QNEC.

Thanks for your help.

[SoCalActuary]

Is there any scenario under which the contributions made under 401(k), 401(m) and employer QNECS can be aggregated for coverage testing (contrary to 1.410(b)-7©)?

Division 1/ Plan A has 401k and 401m contributions.

Division 2/ Plan B has 401k, 401m and QNEC.

Division 3/ Plan C offers only a QNEC.

Thanks for your help.

The 401(k) and 401(m) discrimination tests are applied using a different model to test discrimination. The employer contributions in the QNEC may be treated as 401(k) items if they are simply corrective QNEC to pass a failed 401(k) test.

But Plan C cannot be such a plan. It must be covered under 401(a)(4) testing. You did not explain whether Plan B has QNEC as a separate recurring source of funds - subject to 401(a)(4), or if Plan B only has corrective QNECs.

[Guest Rags]

The QNECs that I refer to are actually profit sharing contributions. But for the sake of simplicity, let's just consider Divisions A and B.

1.410(b)-7© says that the portion of a plan that is a section 401(k) plan and the portion that is not a section 401(k) plan are treated as separate plans for purposes of section 410(b).

1.410(b)-7(d) says that an employer may not aggregate portions of a plan that are disaggregated under the rules of paragraph © of this section.

I want to know if there was a scenario that would allow this aggregation and hence, contradicts these sections.

[SoCalActuary]

The QNECs that I refer to are actually profit sharing contributions. But for the sake of simplicity, let's just consider Divisions A and B.

1.410(b)-7© says that the portion of a plan that is a section 401(k) plan and the portion that is not a section 401(k) plan are treated as separate plans for purposes of section 410(b).

1.410(b)-7(d) says that an employer may not aggregate portions of a plan that are disaggregated under the rules of paragraph © of this section.

I want to know if there was a scenario that would allow this aggregation and hence, contradicts these sections.

No.

The contributions and/or balances are aggregated for 410(b) average benefit percentage testing only. They do not help you pass the test for minimum participation percentages using the profit sharing contributions.

[Tom Poje]

just to make clear on a couple of points - since the answer provided seemed to deal more with nondiscrim rather than coverage.

1. there is no minimum participation test for a DC plan.

2. A QNEC is still a NEC (non elective) so for purposes of coverage may only be used in the nonelective coverage test - never in the ADP coverage test or ACP coverage test.

3. if you aggregate for coverage, then you must aggrgate for ADP testing - I can only assume that is why you are giving the folks in C a QNEC????

4. if you are performing a(4) testing [not coverage], you have to test with and without QNECs

5. how a DC question ended up under DB is beyond me.

[Guest Rags]

5. how a DC question ended up under DB is beyond me.

You're right!? I must have been in this section and just hit post.

Thanks for your responses.