Controlled Group - Plans have different Plan Year Ends

[Steve Waddo]

I have two plans that are a controlled group - however the plans have different plan year ends (one is 5/31 and the other is 6/30). How are these plans handled for testing? Thanks.

[Tom Poje]

can you say "you can't aggregate for the rate group test?"

1.410(b)-7(d)(5) Same Plan year requirement. Two or more plan may not be aggregated and treated as a single plan under this paragraph (d) unless they have the same plan year.

paragraph d is for Permissive aggregation for the ratio percentage and nondiscriminatory classification tests.

however

for the avg ben % test see 1.410(b)-5(d)(3)(ii) ...plan years ending within the same calendar year..

[Steve Waddo]

Thanks for the reply. The plans want to be tested separately since they have different rates of match. How are the able to substantiate that they can pass coverage on their own?

[Tom Poje]

coverage could be a problem since you will have to treat the folks as includable and not benefitting.

e.g. when test plan A, the folks in plan B show as a zero.

in addition, you can't even exclude terminees with less than 500 hours from plan B (if you have to be active to receive a match) because that provision only applies to 'participants' and they are not participants in plan A.

if the HCEs are split between the plans then passing might not be a problem

[Steve Waddo]

But what about the different plan year ends?

[Tom Poje]

suppose for example

plan A 12/31/2010 PYE 1 HCE 5 NHCE

plan B 6/30/2010 PYE 2 HCE 10 NHCE

then when testing Plan A you would have 5/15 = 33.33% NHCE 1/2 = 50% HCE ratio = 33.33/50 = 66.66%

testing plan B 10/15 = 66.66% NHC avg and 1/2 = 50% HCE avg ratio = 66.66/50 = 133.33%

so plan B passes ratio %

plan A fails ratio % since 66.66 < 70.

but 66.66 is greater than any safe harbor %, so if you can pass avg ben pct on a combined bases you pass coverage.

per regs, combine all plans falling within same calendar year

[Trekker]

A follow up question 3 years later.....

What if one plan year ends Jan 31 and the other plan year ends Dec 31.

How is it possible to test the Jan 31, 2014 plan when you do not have the participant count for the Dec 31, 2014 plan and did not have it prior to due date for 5500?

"Falling within the same calendar year" - how would that work in this example?

Thank you for any thoughts on this.