controlled groups and testing

[Chippy]

I have two companies, Company A has 48 NHCE and 0 HCE, deferral and match

Company B has 167 NHCE and 49 HCE

Am I thinking correctly that Company A will pass 410b since no HCE benefits?

Company B is passing as well for match since no HCE benefits. Correct?

for the profit sharing part, there are 215 total NHCEs and out of that 148 are benefiting. 68.83%

for the HCE's 46 out of 49 are benefiting = 93.88%

So it is passing at 73.32%

Since the plan is passing the coverage test, can all other testing be done separately? Company B is a New Comparability Plan.

Do they have the option of doing the adp/acp test together if it helps the plans to pass?

thank you, just want to make sure I am thinking correctly of I am missing something that I am not aware of.

[MWeddell]

Company A's plan automatically satisfies 410(b) and other discrimination tests that might apply because no HCE benefits.

You have to run a coverage test for Company B's plan clearly. It will satisfy the ratio percentage test (167/215) / (49/49) based on the numbers you showed.

The plans can be tested separately now. However, if you have to do general 401(a)(4) testing for the employer nonmatching contributions for Company B's test, then that testing is still based on who benefits out of the entire controlled group's population and you may have some testing challenges there. You mentioned that it is a new comparability plan, which typically means you need to run a 401(a)(4) test.

You may aggregate for ADP / ACP testing purposes but (1) you may have benefits, rights or features that differ between the plans and now have to be tested and (2) IRS recently opined that if you aggregate for that purpose, then the employer nonmatching contribuitons need to be aggregated too.