You can't cover this...

[Ervin Barham]

Employer A owns several subsidiaries, none of which are covered under A's plan.

Not surprisingly, even after throwing out several acquisitions under the transition rule and checking all of the eligibility rules, the plan doesn't pass coverage under the 401(k)portion or the match portion.

Any thoughts as to correction methods (still within 9 1/2 month period)?

I have not tried (yet) any average benefits or non-discriminatory classification testing.

Thanks.

[Lorraine Dorsa]

Try the average benefits test. It is EXTREMELY powerful and well worth the extra number crunching. Also try aggregating plans. Even if you don't pass, you will significantly reduce the margin by which you failed.

If you do actually fail, you will have to retroactively amend the plans to include additional NHCEs. This will pass coverage, but you will have to provide QNECs to those you bring in.

IRC 1.401(a)(4)-11(g)(4)(v) and (vi) requires than employees retroactively brought back in to a 401(k) or 401(m) plan for purposes of satisfying coverage must be given QNECs equal to 1) their plan year compensation times the average deferral % of the NHCEs who were eligible and 2) their plan year compensation times the average contribution % of the NHCEs who were eligible.

(You didn't mention failing coverage re employer contributions, but if you fail here also you'll need to amend to retroactively bring add'l NHCEs in for this purpose as well. This will satisfy coverage, but you will likely fail 401(a)(4) amounts. To satisfy 401(a)(4) amounts, you will need a corrective amendment (see IRC 401(a)(4)-11(g)) which provides additional employer contributions such that 401(a)(4) amounts is passed (either through safe harbor or general test).