Merging Integrated MPP into Cross-Tested PS Plan

[DP]

A client has an integrated MPP and a PS plan with a 6/30/99 FYE. The integrated MPP was merged into the PS as of 12/31/98, and the MPP was funded through 12/31/98 (no last day rule). Can the PS be amended to a cross-tested formula for FYE 6/30/99? I wasn't sure if the cross-tested PS plan falls into the same category as an integrated plan. I know you can't have two integrated plans in the same year.

[richard]

Yes you can merge them.

You would do the discrimination tests one of two ways.

(1) Test the MPP (for its six months) separately from the combinated PSP (for its twelve months). Here, you would, most likely, conclude the MPP passes nondiscrimination because it is a safe harbor (I premuse) integrated formula. You would test the PSP using cross testing, without imputing disparity in the test. As a practical matter, losing the ability to impute disparity in the cross testing of the PSP doesn't cost you that much.

(2) Test the two plans combined. Here, you could impute disparity based on the combined level of contributions for each employee. In this case, you would not be relying on the safe harbor for the MPP, but rather on the general 401(a)(4) regulations for both plans combined.