410(b) for controlled group

[Trekker]

Our plan has been able to stand alone for years by first passing the 70% test on its own, and the controlled group of which it is a part passes using the average benefits test. This year our plan will not pass the 70% test.

QUESTION: Assuming we have an acceptable business criteria for excluding a classification of employees, is there any prohibition against using the average benefits test for our stand alone plan and also using the average benefits test for the controlled group?

Is there some obscure multiple use rule?

Thanks in advance.

[Tom Poje]

There should be only 1 avg ben pct test for any and all plans involved (unless you carve out otherwise excludables and test them separately) It doesn't matter whether you permissively aggregate plans or not, still only one avg ben pct test.

The only exception would be if you have a QSLOB.

see 1.410(b)-7(e)

This cite also includes some examples if there is a QSLOB

[Trekker]

That is encouraging. The TPA was of the opinion that the plan first had to pass on its own and then it would have to pass when the rest of the controlled group (consisting of several employers and two other plans) was considered. The average benefits test for the controlled group passes (including the stand alone Employer), but the stand alone plan does not pass the 70% test on its own.

There is no QSLOB involved. The Employer maintaining this stand alone plan has been deemed (by its parent company) as excludable due to a reasonable business classification.

We are not the TPA and are attempting to nail this down.

Thanks for any other thoughts!

[Tom Poje]

I think you have it correct,

just to be sure there is no confusion. there is one avg ben pct test.

then, depending on how you aggregate or don't aggregate plans there could be a number of avg ben tests or 1 avg ben test.

It is too bad the terms are so similar.

sort of like saying a plan is safe harbor. it could mean a safe harbor 410k or it could simply mean the plan's profit sharing formula is safe harbor (e.g. integrated at the proper level, or comp to comp)