Controlled Group companies & Testing

[Alex Daisy]

Two Companies are part of a Controlled Group, but they maintain separate Plans, and the plans will be combined for testing, is it necessary for the plans to be "mirrors" of each other?

If they are not mirrors of each other, do they still need to be combined for testing because they are part of a Control Group?

If the Plans are able to pass testing without being combined, do I still need to combine because they are part of a Control Group?

Any help and guidance is greatly appreciated.

ALEX

[John Feldt ERPA CPC QPA]

Depends on the "test" you're talking about. If the plans had to be aggregated to pass the coverage test, then they have to be aggregated for 401(a)(4), so any differences in a benefit, right, or feature should also be tested under 401(a)(4).

[Tom Poje]

as John note, which "test"

the aggregation rules are in 1.410(b)-7

probably the one least thought about is the one that says "if you don't have the same plan year you can't aggregate even if you want to"

so the two basic tests (ignoring BRF which of course you may also have to test) are

coverage

nondiscrim

and there are 3 possible components to each plan

401k [ADP test]

401m [ACP test]

nonelective [401(a)(4)]

so in reality you have 3 possible coverage and 3 possible nondiscrim tests.

double that if you test otherwise excludables separately.

but the basic rule is "If you don't aggregate for coverage, you can't aggregate for nondiscrim."

and the reverse is true "if you want to aggregate to pass ADP testing you must aggregate for coverage"

if one plan is safe harbor401k and the other isn't you can't aggregate either.

and as far as I can tell, you could aggregate for 401k but you don't have to for 401(a)(4)