Controlled group, aggregation, testing, etc.

[Belgarath]

An expansion on the topic from a few days ago, and I'm not sure about this question.

Background: You have a controlled group, corporations A and B. Each corporation has a separate 401(k) plan. Assume 401(k) deferrals and match only, no other contributions.

For employees who have met age/service and are eligible:

Plan A has 10 HC, 9 of whom are deferring. It has 90 NHC, 80 of whom are deferring.

Plan B has 2 HC, both of whom are deferring. It has 10 NHC, 7 of whom are deferring.

When testing the plans separately for coverage using all employees from both plans, Plan A passes with no problems. But Plan B does not pass.

Here's my question - does Plan A get "tainted" or potentially disqualified due to the problems with Plan B failing coverage testing? Or is Plan A ok, and just Plan B has the problems to deal with?

I'm really not sure on this.

[Floridaattorney]

I am not convinced that B would fail. Even if it cant pass ratio percentage test, it looks like it might pass the average benefit test.

[MWeddell]

Whether Plan A meets the Code Section 401(a)'s qualification requirements has nothing to do with whether Plan B satisfies coverage testing. There is no taint.

[Belgarath]

Thanks for the responses.

FA - those aren't real numbers - it was strictly to attempt to illustrate the point. As I reread the original post, I probably could have made the question a lot easier:

If one plan of a separate corporation in a controlled group has qualification problems, does it "taint" any of the other plans in the group? Or in this case, if one plan fails testing, does it taint the remaining plan that can pass testing?

Mweddell - thanks for your response.