Controlled Group

[justatester]

I have a plan that has two separate employers. As of Nov. 2013, the ownership structure changed and are no longer considered part of the controlled group (they are still somewhat related just not to the point of being a controlled group). So I now have a multiple employer plan.

How should testing be handled? Do I have the option of testing them together for all of 2013 and 2014? The client want to apply the transition rule which I believe applies to coverage only. I am also not sure they are applying it correctly.

I am thinking for 2013 the could test employer A for the entire plan year and include employer b through November. Then test employer b from Nov-December. Or they could test them separately for the entire year. I don't think they have the option of testing them together for all of 2013. Although, I may be incorrect.

Then depending on the above answer determines how 2014 should be handled.

Thanks for you help!

[shERPA]

If the 410(b)(6)© transition rule is available for coverage, it can apply thru 12/31/14. You do non-discrimination testing on the basis of the 410(b) group, so you would test together thru 12/31/14 when using the transition rule.

[justatester]

So even though they are unrelated for all of 2014, I would test the ADP/ACP together?

[shERPA]

So even though they are unrelated for all of 2014, I would test the ADP/ACP together?

If the Plan Administrator elects to use the transition rule for 2014, yes. 410(b) and 401(a)(4) are linked. Non-discrimination testing is applied to the "plan" that passes 410(b).

Note that the use of the transition is permissive, not mandatory. Also note that the 410(b) regs apply a higher standard than the code for the transition rule to be available. The code conditions it on no significant changes in coverage, the regs say no significant change in the plan or in plan coverage.