Average Benefits Test

[PensionPro]

Standalone non-TH cross-tested PSP requires 1000 hrs and last day for allocation purposes. Ratio percent is at 60%. Can the plan test for coverage under ABT or will they fail the reasonable classification test because 1000 hrs and last day are not objective business criteria?

Thanks for any insight!

[ETA Consulting LLC]

They can test under the average benefits test. It appears they will have already passed the non-discriminatory classification test at the maximum ratio for passing the test is 50%.

Good Luck!

[chc93]

I think the IRS would like us to believe (and may have actually said it in conferences) that 1000 hours and last day are not a "reasonable classification". However, I think everyone uses the 1000 hours and last day as a "reasonable classification" and therefore uses the ABPT for coverage. I don't think anyone actually follows this IRS "belief". I don't think I've heard of this being challenged by the IRS either.

[Mike Preston]

ERISAToolkit, what in heavens name are you talking about?

[ETA Consulting LLC]

The non-discriminatory classification test.

[PensionPro]

The non-discriminatory classification test.

The classification must be BOTH reasonable and non-discriminatory. It is non-discriminatory, but is it reasonable? CHC93 addresses the issue raised. Our firm is very conservative and will not cross paths with IRS informal pronouncements. Curious if there are any other perspectives or if the IRS has changed its views any.

[ETA Consulting LLC]

I'm aware of that. I just considered Last Day/1000 hours to be accrual requirements as opposed to class definitions. Not sure if I mis-read the question.

Good Luck!