401(k)

[cpc0506]

There are two employers. They are a brother-sister controlled group, but each has it own plan. The plans are identical. Both plans cover union as well as non-union employees. The owners receive compensation from both companies, but only make deferrals to one or the other, but not both.

How is testing handled under these circumstances? Do the plans have to be combined to do ADP Testing?

[Jim Chad]

I think you could permissively disaggregate. What I mean by this is you would test each plan for coverage counting all employees of both plans in the denominator. If they both pass coverage, then you could test for ADP separately.

But, Kathy, I suggest you don't do this work until someone who knows more than me confirms or corrects this.

[rcline46]

If each plan passes 410(b) separately, you can test separately. HOWEVER, for the owners, you must use their pay AND DEFERRALS from both companies in each test.

[Guest Sieve]

Actually, rcline's reference to owners should be a reference to HCEs. (Treas. Reg. Section 1.401(k)-3(a)(3)(ii).)

[rcline46]

Sieve is correct, of course. But in the OP only the owners (which are (most likely) HCEs) take compensation from both companies.

[Jim Chad]

Thanks Rcline46 and Sieve. I missed that.

[rcline46]

Jim - that's why I like this board. It is hard to remember EVERYTHING, things they are a changin'.

Someone remembers that little piece you overlooked/forgot/never knew and helps you out. I for one admit to having those 'OH MY GOSH' moments.

[cpc0506]

Since both plans cover union and non-union, can't I disaggregate even further. Company 1 - union, Company 1 - non-union, Company 2 - union, Company 2 - non-union?

Thanks for all your responses.

[rcline46]

If the union bargained in good faith for retirement benefits, then you can exclude union from testing as if they never existed.

[Tom Poje]

I thought the rule was you HAD to disagregate the union from the nonunion folks. But you still have to run an ADP test on the Union folks (ACP is an automatic pass)