Profit Sharing & Cash Balance Plan

[Laura Harrington]

I am doing a 401(a)(4) nondiscrimination test for a 401(k) profit sharing plan. The plan sponsor also has a cash balance plan. The cash balance plan was not aggregated with the profit sharing portion of my plan for coverage or nondiscrimination. Both the profit sharing portion of my plan and the cash balance plan satisfied coverage using the ratio percentage test, so I am only computing the average benefit percentage test for purposes of determining if a rate-group satisfies the 401(a)(4) testing requriements.

Since the plans were not aggregated, both satisfied the ratio percentage test and did not rely on the average benefit test, when I compute my average benefit percentage test for the 401(a)(4) nondiscrimination test on the profit sharing plan, can I rely on the rule that allows me to treat the profit sharing plan and the cash balance plan as seperate testing groups if I compute the test using allocation rates and not accrual rates?

We don't administer the cash balance plan so we don't have the accrual numbers for the defined benefit plan and don't want to request it if we can get by without it.

[Tom Poje]

yes, at least based on 1.410(b)-5(e)(3) that appears to be permissible.

I suppose logically that would make sense. If A passes and B passes the even if you combined A + B it would end up passing.

[John Feldt ERPA CPC QPA]

...The cash balance plan was not aggregated with the profit sharing portion of my plan for coverage or nondiscrimination...

We don't administer the cash balance plan so we don't have the accrual numbers for the defined benefit plan and don't want to request it if we can get by without it.

How do you know that the cash balance plan satisfied 401(a)(4) without using the profit sharing balances? If that's true, okay, but it's also a rare event to have a DB/DC arrangement where the employer does not use the profit sharing to help the 401(a)(4) test for the DB plan. Just an obsevation/question.

Also, how do you determine if your plan is top heavy without having the DB numbers? Are the documents coordinated so it is clear regarding which plan provides the top heavy minimum?

[AndyH]

I am doing a 401(a)(4) nondiscrimination test for a 401(k) profit sharing plan. The plan sponsor also has a cash balance plan. The cash balance plan was not aggregated with the profit sharing portion of my plan for coverage or nondiscrimination. Both the profit sharing portion of my plan and the cash balance plan satisfied coverage using the ratio percentage test, so I am only computing the average benefit percentage test for purposes of determining if a rate-group satisfies the 401(a)(4) testing requriements.

Since the plans were not aggregated, both satisfied the ratio percentage test and did not rely on the average benefit test, when I compute my average benefit percentage test for the 401(a)(4) nondiscrimination test on the profit sharing plan, can I rely on the rule that allows me to treat the profit sharing plan and the cash balance plan as seperate testing groups if I compute the test using allocation rates and not accrual rates?

We don't administer the cash balance plan so we don't have the accrual numbers for the defined benefit plan and don't want to request it if we can get by without it.

Sorry, I'm late to this party. I don't think this is permitted unless the PS is tested on a contributions basis and the cb is tested on a benefits basis. Do you know that to be true?