Average Benefits Test

[Guest guest809]

Our parent company recently purchased another company. We're testing things to see how we'll pan out with the coverage test. Some of our plans now fail the ratio test (using the entire controlled group) so we're moving to the ABT.

As part of the ABPT on a stand-alone basis (no permissive aggregation yet), we need help with determining the denominator for each plan.

Plan A

NHCE avg benefit rate: 9%

HCE avg benefit rate: 10%

(1000 NHCEs and 200 HCEs)

Plan B

NHCE avg benefit rate: 4%

HCE avg benefit rate: 4.5%

(300 NHCEs and 50 HCEs)

Aggregate

NHCE avg benefit rate: 7.85%

HCE avg benefit rate: 7.25%

Are the results for Plan B 88.9% (ie 4/4.5) or as 55.2% (4/7.25)?

Is the NHCE Concentration 85.7% (300/350) or 19% (300/1550)?

Thanks.

[ETA Consulting LLC]

I think there is a semantics issue. The Average Benefits Test is when you include "ALL PLANS" sponsored by the employer. The concept of "Permissive Aggregation" is to combine two or more plans under one test so you do not have to test all plans together. Technically, there is no such thing as an Average Benefit Rate for only one plan when the employer sponsors two or more.

More detail on whether each plan provides the same allocation rate to each employee or whether the same rate is provided to all plans (and the ratio percentages merely fall below 70%). Did you consider restructuring the plan in component plans? Not sure if all HCE benefited (or at the higher rates).

Too many questions with no answers.

Good Luck!