401(k) / Control Group / combined testing?

[Guest silversurfer550]

Companies A & B are part of a control group. They have been operating their individual 401(k) plans separately for years and have never done any combined testing, etc.

Company A passes all of its tests regularly. Company B's HCE's are getting refunds and failing the ADP test. Both A & B are passing the minimum coverage test.

1) Are both A& B required to perform combined testing or can they continue to operate as they have been, completely separate with different record keepers, etc...

2) If both A&B are required to perform combined testing, and they pass the tests, can they then operate and test as separate individual plans as they were? If so, which tests must they pass in order to do so?

3) Where do I find this information in the regs?

[Guest silversurfer550]

Any ideas?

[Jim Chad]

I will start the discussion with this idea. FWIW I think it would be normal to test both ways, combined and separate, and see which works best. On the other hand; there are some provisions, such as one Plan being safe harbor, that would preclude combined testing. Anyone else have any thoughts?

[Tom Poje]

you want to look at 1.410(b)-7 in the regs

dealing with aggregation.

for instance 1.410(b)-7(d) permissive aggregation and in particular (d)(5) plan must have same plan year

as Jim pointed out you can't aggregate a safe harbor 401(k) with a non safe harbor 401(k)

I suppose if by chance a key employee was in both plan you have to aggregate.

but basically yes

you can

aggregate for the ADP test , this could cause plan A to fail or it might help B pass

keep disaggregated as has been done. this is fine. but coverage testing has to be done the same way. thus, everyone from B is treated as includable and not benefiting when looking at Plan A