General Testing

[justatester]

Here is the situation:

3 plans are members of the controlled group. 2 of the plans are 10/31 PYE- 1 12/31 PYE. Effective 11/1/07, the plan froze their DB contributions to new employees and added a profit sharing contribution that is a point based allocation formula. For the 2007 plan year there are no HCEs receiving this contribution. The other 2 plans have profit sharing as well however they are a % of compensation allocation. Since one of the contributions is not a uniform rate, we feel general testing is required. The question is how to run the general test or is it even required for the 07 time period since there are no HCEs. If testing is required, and this contribution passes on its own, would you only use that population in the general test and treat all others as nonexcludable not benefiting? Which actually brings up another question...Can each profit sharing contribution be treated separately if it passes coverage separately? For example, Group A treats only group A employees as benefiting, but treats Group B & C employees as non excludable not benifiting.

Any thoughtw would be greatly appreciated...

[Tom Poje]

well, you are certainly headed in the right direction.

you pointed out you have a controlled group, and if you have different formulas then some type of testing must be done.

you indicated there are 3 plans, and two are the same plan year, so that really complicates things because you can not aggregate plans with different plan years. (except for the avg benefits % test, if that is needed)

if there are no HCEs in a plan, then that plan automatically passes testing.

(but that doesn't prove the other 2 plans pass if they have an HCE - even if they alloacte a % of pay.

for example, suppose Plan B is loaded up with HCEs and it alloactes a 10% of pay formula, while plan C is loaded up with NHCEs and uses a 3% of pay formula. Clearly B needs to be tested to prove nondiscriminatory.

[justatester]

In the plan receiving the point base allocation, it is only anyone hired after 11/1/07 that is receiving this allocation. There is another ps contribution in a separate plan that everyone gets (including those on the point base allocation)-They are all in Group A. Group B & C are receiving ps under a separate plan.

So, Group A has k&M, along with this point base ps contrib all going into plan 1. Group A also has a separate % based ps contrib going into plan 2. Group B has one plan for the k&m, and a separate plan for the PS. Group C has the same thing. So we essentially have 6 plans with 3 employers under a controlled group. For coverage, can I treat each PS piece as separate (of course counting the other ees as non excludable, not benefiting) OR must I aggregate all ps contributions under the ratio test and treat as one?

[Mike Preston]

If they are the same plan year, you *CAN* treat them as separate. If they are not the same plan year, you *MUST* treat them as separate.

BTW, I can't figure out from your original post what year ends you actually have.

[justatester]

I have 11/1/07-10/31/08-2 plans. 1/1/08-12/31/08

For the general test, it is done on a controlled group basis? By which I mean, the total ee count is in the denominator and the numerator would be only those receiving the point based contrib.