DB/DC testing and consistency

[cathyw]

We're testing a cash balance and 401(k) plan. The plans have always passed the DB/DC gateway and general tests. This is the first year that the cash balance plan is using actual rate of return for the interest credit. Since the rate of return for 2015 was flat, the determination of accrued benefits for testing on an annual basis is causing the combined plan to fail (a)(4). However, if we calculate aggregate accrual rates on the basis of accrued to date for both the DB and DC plans, then the combined plan passes.

Question: Can the aggregate allocation rates needed for gateway be determined on an annual basis for both plans, while the aggregate accrual rates needed for general test be determined on an accrued to date basis for both plans? The consistency provisions of Reg. 1.401(a)(4)-9(b)(2)(iv) states that the measurement period must be applied consistently for the entire DB/DC plan. We are using the same measurement period for both plans, but we're using different measurement periods for determining allocation rates as opposed to accrual rates.

Thanks,

Cathy

[Mike Preston]

This question answers itself by taking a step back and a deep breath. First, if one accepts the principle that the gateway calculations are always done on an annual basis (i.e., can not be done on an accrued to date basis) then if the consistency provision means what you imply no plan could ever use accrued to date for any portion of the a4 testing regimen if it needed to satisfy gateway. I submit that such an interpretation is unreasonable. Therefore the consistency provision doesn't preclude the use of annual rates for gateway purposes and accrued to date for other purposes.

[cathyw]

Thank you Mike for weighing in.

Regards,

Cathy