ADP/ACP Testing for a Controlled Group

[msmith]

Background Information: 4 Plans in a Controlled Group. Plans 1, 2 and 3 are traditional 401(k) Plans, with a Match. Plan 4 is a Safe Harbor Match Plan. We had to utilize the ABPT and the Non-discriminatory Classification Tests to pass coverage.

Question: Can Plans 1, 2 and 3 be aggregated for the ADP/ACP testing?

[Tom Poje]

if plans 1, 2 and 3 were aggregated to pass coverage then you have to aggregate for the ADP/ACP test since the testing methods have to be the same for coverage as for nondiscrimination.

[msmith]

And I can ignore the Safe Harbor plan for ADP/ACP testing, even though is was included for coverage testing?

Thank you, Tom.

[Tom Poje]

then I misunderstood your original explanation. I was thinking you only combined the 3 non safe harbor plans for coverage

1.401(k)-1(b)(iii)(B) last sentence (or maybe that is 'death' sentence in many cases)

...Similarly, an employer may NOT aggregate a plan using the ADP test safe harbor provisions of section 401(k)(12) and another plan that is using the ADP test of section 401(k)(3)

the problem is that 1.401(a)(4)-9 2 or more plan that are permissively aggregated ...and treated as a single plan under 1.410(b)-7(d) must also be treated as a single plan under 401(a)(4)

I have always viewed this as meaning you are stuck.

The ERISA Outline Book 11 part A.3b (somewhat cryptic to me) says if 2 401k plans are permissively aggregated the ADP safe harbor is not available unless the plans treated as a single plan satisfy safe harbor.

That sounds like it is saying yes, you can aggregate them but you don't get the safe harbor, but then maybe it is only referring to situations in which the plans have different safe harbor formula.

It is too near the 4:15 limit on Friday for me to write more!

[msmith]

Thank you, Tom.

[Mike Preston]

I think msmith is thinking that just because they had to use the ABT to reduce the coverage % (which requires aggregating all four plans) that they are somehow forced into considering all four as aggregated for coverage. Not true.

[msmith]

To further clarify, I would like to run the ADP and ACP together, for the 3 traditional 401(k) plans. I believe these 3 will pass the ratio % test (of course, considering the Safe Harbor participants as not benefitting); and I might be able to obtain better ADP/ACP results. These 3 plans have the same Match formula.

Historically, we have tested using ABPT and Non-discriminatory classification so that we could test separately for ADP and ACP (better results in past years), without complications of the Safe Harbor plan.

[austin3515]

Let me break it down for you.

If you are aggregating the 3 Non-SH Plans for the nondscrim classification portion of the Avg Ben Test (treating the SH Plan participants as not benefitting), then you are required to test those 3 Non-SH Plans together for ADP/ACP which I gather is what you want to do.

Assuming you are passing the Avg Benefits test (which means the SH Plan can also pass the nondiscrim. classification portion of the Avg Ben Test treating the other 3 plans's participants as not benefitting) then you should be all set.

[msmith]

That is exactly what I want to accomplish.

Thanks to all that responded.