DB and 403(b) aggregation for 401(b) testing

[dmb]

A prospective not for profit client has a DB plan and a 403(b) plan that includes employer contributions. Can the two plans be aggregated for 410(b) testing? Thanks.

[movedon]

If I recall correctly, the 403(b) plan may permissively aggregate with the qualified plan to demonstrate compliance with coverage, but the 401(a) plan may not permissively aggregate with the 403(b) for same.

[AndyH]

My understanding is that the DB plan can be aggregated with the 403(b) plan for purposes of testing the 403(b) plan but that the 403(b) plan may not be aggregated with the DB plan for testing of the DB (or any 401(a) plan).

If I am incorrect I would like to know that, but I'm pretty sure this is right.

[movedon]

AndyH said what I meant to say, but he said it about twenty times better.

[dmb]

My understanding is that the DB plan can be aggregated with the 403(b) plan for purposes of testing the 403(b) plan but that the 403(b) plan may not be aggregated with the DB plan for testing of the DB (or any 401(a) plan).

If I am incorrect I would like to know that, but I'm pretty sure this is right.

Thanks Andy.

I hope you're right Andy, but do you know of a code or reg section from which you have the understanding?

[AndyH]

It's an interpretation of 410(b). A careful reading is required. In addition, a review of the final 403(b) regulations would be prudent.

Start with 1.410(b)-(7)(a) which defines what a plan is for the aggregation rules that are exclusive to 410(b). A 403(b) is not a plan for aggregation purposes.

A 403(b) plan I believe is now tested under the 401(a)(4) rules but those aggregation rules would point to 410(b) which does not aggregate the two types.

You'd have to research this carefully to be comfortable. I have before, but it was a while ago so I can't be more specific right now. You can also check out the Answer Books or the EOB for further interpretation.

[dmb]

It's an interpretation of 410(b). A careful reading is required. In addition, a review of the final 403(b) regulations would be prudent.

Start with 1.410(b)-(7)(a) which defines what a plan is for the aggregation rules that are exclusive to 410(b). A 403(b) is not a plan for aggregation purposes.

A 403(b) plan I believe is now tested under the 401(a)(4) rules but those aggregation rules would point to 410(b) which does not aggregate the two types.

You'd have to research this carefully to be comfortable. I have before, but it was a while ago so I can't be more specific right now. You can also check out the Answer Books or the EOB for further interpretation.

Thanks again Andy, greatly appreciated. We are researching carefully.

[AndyH]

The 403(b) Answer Book (Q4.39) states that the sponsor may elect to aggregate a 401 plan for purposes of testing the 403(b) plan. The context is IRS Notice 89-23, but I would check the final 403(b) regs as well if you want a source document. That pretty clearly is the correct rule, as I had stated.

The aggregation for testing of a 401(a) plan is prohibited because the 403(b) plan is not subject to 410(b) aggregation because it is not defined as a plan for that purpose.