Company w/2 divisions passes 410(b) wants separate plans

[CharlesLeggette]

I'm a bit rusty on the separate Plans issue...

company has 365 nHces and 38 Hces

division 1 has 208 nHces and 30 Hces

division 2 has 157 nHces and 8 Hces

division 1 = 208/365 / 30/38 = 72.18%

division 2 = 157/365 / 8/38 = 204.32%

so looks like they pass RPT -- can each company have a completely different 401k Plan [with no non-elective]...e.g., division 1 have a 100% 1st 6% SH

and division 2 have non-SH 100% first 3%

my recall says yes...but if they add NEC, then ABT must be passed...

The headcounts are after 1 yr/age 21 application -- I assume that's OK.

I'd appreciate any thoughts...

[Tom Poje]

for a real simple case...

lets say you added a NEC and gave 5% to everyone in Div 1.

for coverage, division 1 ratio % would be 72.18%, it passes, no ABT needed.

If you tested on an allocation basis, the rate group for each HCE would also be 72.18%

(unless some of the NHCEs don't receive due to last day rule or hours requirement.

so again, each rate group would pass and no ABT needed.

[CharlesLeggette]

Interesting so, we could have a 5% nHce NEC + new-comp in division 1 -- or am I mis-understanding you??

[Tom Poje]

in the example I used everyone received 5% (not a new comp, simply a nonelective. I assumed NEC meant NonEleCtive, but maybe you meant NEw Comparability.

if you have a new comparability, then for coverage the ratio % for plan 1 is still 72.18%

but when you get to rate group testing then it depends on how things turn out.

if all 208 NHCE is plan one were age 30 or less, and all 30 HCEs were age 50 or more that is a 20 year difference on everyone.

so I think 5% to NHCEs and 25% to HCEs would actually work because 1.085^20 = 5.11, and when cross tested (treating everyone in division 2 as 0 for nonelective) the ratio % for each rate would be above 70%.