SH 401(k) / ESOP Permissive Aggregation

[austin3515]

Safe Harbor 401k Plan with 3% SHNEC going to the ESOP. May I permissively aggregate the 3% SHNEC going to the ESOP with a 6% profit sharing going to the owners in the PS Plan? Assuming of course I pass rate group testing. Both Plans are sponsored by the same employer and have the same plan year.

[originally posted in ESOP section]

[ESOP Guy]

If I recall in the last post you said you were going to ask TAG. Did they not have an answer or is my memory faulty?

[austin3515]

They never responded, so I just resent my question to them.

But I did find this oddly enough from a Q&A in their archives:

http://www.law.cornell.edu/cfr/text/26/54.4975-11

(e) Multiple plans—

(1) General rule. An ESOP may not be considered together with another plan for purposes of applying section 401(a) (4) and (5) or section 410(b) unless:

(i) The ESOP and such other plan exist on November 1, 1977, or

(ii) Paragraph (e)(2) of this section is satisfied.

(2) Special rule for combined ESOP's. Two or more ESOP's, one or more of which does not exist on November 1, 1977, may be considered together for purposes of applying section 401(a) (4) and (5) or section 410(b) only if the proportion of qualifying employer securities to total plan assets is substantially the same for each ESOP and:

(i) The qualifying employer securities held by all ESOP's are all of the same class; or

(ii) The ratios of each class held to all such securities held is substantially the same for each plan.

(3) Amended coverage, contribution, or benefit structure. For purposes of paragraph (e)(1)(i) of this section, if the coverage, contribution, or benefit structure of a plan that exists on November 1, 1977 is amended after that date, as of the effective date of the amendment, the plan is no longer considered to be a plan that exists on November 1, 1977.

[ESOP Guy]

And if you search for the word "ESOP" in the 410(b) regulations it is clear you have to test the ESOP and non-ESOP as separate plans for coverage unless they meet the requirements you listed.

http://www.law.cornell.edu/cfr/text/26/1.410%28b%29-7

That is why I am thinking you can't do what you want to do.

I am still interested in hear what TAG says.