BRF Testing

[justatester]

We have a client that requires BRF Testing. Here is a breakdown of the formulas:

50% to 4% (A)

50% to 5% (B)

75% to 6% ©

100 % of 1, plus 50% on 2&3, Plus 25% on 4&5 (D)

For my testing groups breakdowns:

Test 1: Group A, B, C

Test 2: Group B, C

Test 3: Group C

Test 4: Group D

Is this correct?

[MWeddell]

Your way is permissible.

Other permissible methods (in my opinion -- the regulations are quite sparse on these details):

Test 1: Group A

Test 2: Group B

Test 3: Group C

Test 4: Group D

Test 1: All matching formulas at least as favorable as A, which is Groups A, B, C, and D

Test 2: All matching formulas at least as favorable as B, which is Groups B, C, and D

Test 3: All matching formulas at least as favorable as C, which is Group C only

Test 4: All matching formulas at least as favorable as D, which is Group D only

[justatester]

When breaking down the groups, are you looking at the overall total match received vs the actual formula?

For example, the 50% to 5% (2.5% total) vs the 100% on 1%, 50% on 2&3, and 25% on 4&5 (2.5% total): If a person defers 1% they are getting different levels one being 100% the other being 50%. Can you test them in one group as equal formulas? Or since the participant has the availability to receive the match at a total of 2.5% make them "equal"?

[MWeddell]

I'm not sure I can explain my thinking in writing any better, but I'll try.

You can test all of the different matching formulas separately, which is the first method I indicated.

Alternatively, you can test each match formula that is at least as favorable as the A formula, at least as favorable as the B formula, at least as favorable as the C formula, and at least as favorable as the D formula. When I consider which formula is at least as favorable as B, then I include the employees eligible for the D formula because regardless of how much they contribute, D is >= B. I agree that the two formulas are not equal because if an eligible employee contributes more than 0% but less than 5%, D is better than B, which is why test 4 is still required on Group D alone.

[Jim Chad]

Just want to clarify.....are you talking about coverage testing, ACP test or both?

[MWeddell]

We're talking about benefits, rights or features testing under Treas. Reg. 1.401(a)(4)-4. Presumably there is one "plan" (in the 410(b) sense of the term) that includes 4 matching formulas.