Multiple plans and 105(h) non-discrimination testing

[Guest RTMoore]

Hello all,

There's some great commentary on these forums on how 105(h) applies to specific situations. However, wouldn't 26 CFR 1.105-11©(4) (reproduced below) provide a work-around for many of the non-discrimination limitations on plan design?

For example, wouldn't 1.105-11©(4) allow an employer to setup a series of individual plans (all contained within one document) that provides differing benefit levels on the basis of job category, tenure, salary vs. hourly, and other reasonable and objective business classifications? Wouldn't it also allow the individual plans to impose differing waiting periods?

It's not a complete pass however. The way I understand it, if you use multiple plans and "reasonable and objective business classifications" (see 26 CFR 1.410(b)-4), you still have to pass one of the 1.410(b)-4 safe/unsafe Harbor percentage tests.

Does anyone have any insight on 1.105-11©(4) and the legislative history as to why this provision exists?

26 CFR 1.105-11©(4)

(4) Multiple plans, etc. (i) General rule.

An employer may designate two or more plans as constituting a single plan that is intended to satisfy the requirements of section 105(h)(2) and paragraph © of this section, in which case all plans so designated shall be considered as a single plan in determining whether the requirements of such section are satisfied by each of the separate plans. A determination that the combination of plans so designated does not satisfy such requirements does not preclude a determination that one or more of such plans, considered separately, satisfies such requirements. A single plan document may be utilized by an employer for two or more separate plans provided that the employer designates the plans that are to be considered separately and the applicable provisions of each separate plan.

[Ron Snyder]

You are correct, it is a very helpful provision.

We are using this nondiscrimination alternative test to allow larger contributions for HCEs to an HRA than for non-HCEs.

Don't know the history but it strikes me as similar to rules that apply to qualified retirement plans permitting aggregation of benefit plans for testing purposes.

[Christine Roberts]

You are correct, it is a very helpful provision.

We are using this nondiscrimination alternative test to allow larger contributions for HCEs to an HRA than for non-HCEs.

Don't know the history but it strikes me as similar to rules that apply to qualified retirement plans permitting aggregation of benefit plans for testing purposes.

when you do the safe/nonsafe harbor test do you revert to the HCE definition for retirement plans or keep using the HCI definition under 105(h)(5)??

[J Simmons]

You are correct, it is a very helpful provision.

We are using this nondiscrimination alternative test to allow larger contributions for HCEs to an HRA than for non-HCEs.

Don't know the history but it strikes me as similar to rules that apply to qualified retirement plans permitting aggregation of benefit plans for testing purposes.

Could you provide an example of how this works?