Three DC Plans

[Cloudy]

I need some help/confirmation that I will be doing coverage and nondiscrimination testing correctly for the following situation:

3 DC plans - all plans cover all employees.

1. PS/K 21 & 1

2. MP 21 & 2

3. PS 21 & 2

Plan 1 meets coverage on it's own and the PS contribution is that same % for all.

Plans 2 & 3 combined and x-tested.

For 2 & 3 the combined plans pass the ratio percent test but need the ABT to pass rate group testing.

Questions re plans 2 & 3 testing:

1. Can all employees with less than the 2 year eligibility be excluded from both the ABT and the a4 tests? (In other words, someone that has 1 YOS but less than 2 YOS will be "excludable" rather than "not benefiting".)

2. Should the ABT benefit % include the K & PS benefits from Plan 1?

Thank you to anyone that replies.

[Tom Poje]

1.410(b)-6(b)(3) Plane benefitting otherwise excludable employees .... is performed without regard to section 410(a)(1)(B)

[that section is the special 2 year rule.]

my understanding (from wherever I learned it) is that it means you can't apply the 2 year rule to otherwise excludables.

I guess since the avg ben pct test includes all contributions, and the maximum exclusion for a 401k portion is only 1 year, I guess that would make sense.

or put another way, when testing you have to use the eligibility from the least stringent plan.

you can test otherwise excludables separately, but the least stringent eligibility in any 401k plan so you end up including anyone with at least 1 year of service.

[Cloudy]

Thanks Tom. So the people with 1 YOS but less than 2 YOS will be in the ABT with whatever benefit they got in Plan 1, and they will be in the a4 test with zero (not benefiting for a4) since only those with 2 YOS get any benefit in Plans 2 & 3.

[Tom Poje]

for sure they show in the avg ben pct test (at least as I understand it)

as for when you get to the rate group test - I'm not sure what happens.

I suppose the issue is that anyone from plan 1 is not necessarily 100% vested after 2 years in the nonelective [in plan 1], so that is unfair and you get penalized - so for instance if it was a controlled group with 3 different populations that certainly is 'unfair', especially if 2 and 3 consisted of all the HCEs. granted that may not be your situation, but why should the rules change if you didn't have a controlled group of 3 different companies.

but I personally have never seen the issue addressed before.

[Cloudy]

Thanks for your help Tom!