Failure under 410(b) Nondiscrimination Testing

[holdco]

Hello everyone! Question for anyone who understands non-discrimination testing...

Our client has a 401(k) plan. The own 100% of the stock of company A. Company A has its own 401(k) plan that passed nondiscrimination testing. We are required to take into account company A as part of the controlled group for purposes of nondiscrimination testing for our client's plan. Our client failed the 410(b) test. We are now going to try an average benefits test.

However, under any appropriate remedial procedures, does anyone know how to correct a 410(b) failure? Additional contributions? Including certain people? Any guidance or pointing me in the right direction would be greatly appreciated.

Thank you!

[BG5150]

The plan document may have the remedy.

[shERPA]

You may be able to aggregate the two plans for 410(b) coverage. Then you would have to perform the ADP test on the aggregated plans.

[holdco]

Thank you both for the replies. I will check the plan document once more. Assuming it doesn't provide a remedy, and no amount of maneuvering allows it to pass the average benefits test (so we fail nondiscrimination testing under section 410(b)), what are our options?

My understanding is that we can make a plan amendment allowing for a corrective contribution if it's with 9.5 months of the end of the plan year (10/15). If it's after that, we VCP it as a demographic failure? Is this somewhat accurate?