When to use component plan testing

[austin3515]

401k/PS plan with older doctor (50's) and younger doctor (30;s) as owners.

Would it be fair to say that component plan testing would only work better if the younger Doctor's "plan" would do better testing based on allocation rates (including disparity)? So if, for example, the younger doc is getting more under cross-testing all as one plan, then he would have received under an integrated allocation, then component plan testing would not help?

It occurs to me that if cross testing would work for an HCE it should work whether or not you’re doing compoentn testing – you’ve either got enough people in your rate group, or you don’t. Component plans will not increase someone’s EBAR.

[Jim Chad]

Austin, Much of what you say is true. Part of it, i can not say yes to , because I am not sure I follow. (It has been a long day.)

You are right in that one great way to use component testing to help a cross tested Plan is to test the group of employees with a young HCE by using allocation rates. This way the young HCE's high EBAR does not matter.

Does this help?

[Tom Poje]

unless there are NHCEs receiving the same allocation rate (aside from the help permitted disparity provides) as the young HCE then component testing is not going to help. The most common times I've seen component testing done is with HCEs kids who have received a minimum contribution due to top-heavy, safe harbor or other non elective.