410(B) Coverage Requirements and Controlled Groups

[Guest Enda80]

As you know, due to attribution (for example, between husband and spouse, or between child and parent), two companies can form a controlled group. My questions include

1. Can the plans meet 410(B) coverage requirements separately? For example, if, without aggregating the plans, one plan achives a 80% 401(B) ration, while the other plan achieves a 100% coverage ration, will that cover the controlled group as a whole for 410(B) coverage requirements?

2. What if the two plans have different plan years? Say one plan has a fiscal year that ends in September (so, for example, the plan year would end on 9/30/09), while the other plan runs on a calendar year and thus has a plan year that ends in December (for example, 12/31/09)? How does one figure out the 410(B) required coverage then? Would one compare the plan year that ends within the calendar year of the latter plan?

[Tom Poje]

see 1.410(b)-7(d)(5) 2 or more plans may NOT be aggregated andtreated as a single plan unless they have the same plan year.

When you have a controlled group, all employees are treated as being employed by one employer.

If plans have the same plan year, you are allowed to permissively aggregate the plans for testing purposes.

(Thus, for example, if each plan has a 401(k) feature, everyone could defer, so you would expect the 401(k) feature to be at 100% for coverage.) There is no requirement to aggregate the plans, but if you don't, then you end up with employees being includable and not benefiting.

If the plans are not the same plan year, you have no choice - then all employees from one plan would be treated as includable and not benefitting for the other plan.

the one exception to the rule would be the average benefits percentage test, which is aggregated even if plan years are different.

see 1.410(b)-5(d)(%)(ii)