ADP/coverage testing for control group

[AKconsult]

We have 2 related companies, both have deferral only plans. The HCEs are all in 1 plan. The plan features are identical in each plan. Both plans pass ADP independently, but if we combine the plans and run 1 ADP test, it fails. If we disaggregate for coverage, one plan is below 70% coverage. Of course, if we combine the plans for coverage, it passes, but then we would need to combine for ADP testing, and ADP would fail.

Any comments?

[QDROphile]

The system sometimes works?

[Tom Poje]

you said 1 plan fails coverage when testing separately. I assume you mean it fails the ratio % test.

It is of course possible the plan might pass the avg ben test and thus pass coverage

the avg ben pct test portion would include all contributions and all people and could be run on an accrual basis without triggering the gateway test, as you are only testing for coverage and not nondiscrim.

[BG5150]

^ unless the plan has fail-safe language. Then you lose the ABT for coverage.

(I'm pretty sure)

[Tom Poje]

no fair. you have a better cape than mine.

[BG5150]

yeah. mine moves!

[AKconsult]

Tom, when we run the average benefits test with all people and all deferrals, we do pass coverage. Would you agree that at this point we can say that coverage is passed, and ADP is passed - given that the only way to pass ADP is to run 2 separate ADP tests? Can you still run 2 separate ADP tests even though we combined the plans for average benefits testing?

[Tom Poje]

that would be my understanding

ERISA Outline Book 2012 ed would seem to agree

ch 8 section V part c.3

.....1.410(b) - 7(e)(1) this is a special aggregation rule and is required, regardless of whether the plans are otherwise permissively aggregated for coverage testing purposes...

Because of the aggregation aspect of this test, the ABP calculated for the ABP testing group will apply to all plans included in the ABP testing group.

(emphasis mine)