Nondiscriminatory classification table

[BG5150]

When doing the nondiscriminatory classification test, we use the mid point between the safe harbor and non-safe harbor numbers.

Are those two numbers (sh and nsh) used for anything else? If we are always using the midpoint, why have 2 #'s?

[My 2 cents]

The safe harbor and unsafe harbor numbers are used for non-discrimination rate group testing. If the actual values are better than the safe harbor, you are safe. If worse than the non-safe harbor, you are in trouble. Unless the midpoint disguises what would appear problematical under a facts-and-circumstances analysis (and anything between sh and nsh is subject to a facts-and circumstances analysis by the IRS), use of the midpoint is probably OK.

[Tom Poje]

clarification

when you run coverage testing you pass if ratio % > than the safe harbor and whatever else (e.g avg ben pct test)

if that fails, you can get by if ratio > unsafe harbor and you have a note from your mom that says it is ok, you sacrifice a goat and a bunch of other stuff (or something like that)

when you run nondiscrim you need to pass at least the midpoint. the unsafe % is only used to determine what the midpoint is when performing this nondiscrim test.

[Mike Preston]

The midpoint is always used for rate group testing. The SH is used for 410(b) coverage testing. If 410(b) is less than SH but equal or greater than non-safe harbor then facts and circumstances.

[K2retire]

and you have a note from your mom that says it is ok,

The note from my mom would undoubtedly include a reference to the fact that our entire industry is focused on what she describes as "pernicious minutia".