Permissive Aggregation

[justatester]

Controlled Group: 1 plan is safe harbor and 1 plan is not.

Plans do not pass coverage separately. Can I permissive aggregate the SH and non-SH plan for to pass coverage? If I can, I understand I now have to run an ADP/ACP test on a combined basis.

In other words, for SH plans you are deemed to pass ADP and do not have to run a test. But am I 1) "allowed" to run a test 2) run a test on an aggregated basis with a non-SH plan. (Assume same plan year end and testing method)

Any thought would be greatly appreciated.

[Tom Poje]

well, 1.401(k)-1(b)(4)(iii)(B) last sentence says

Similarly, an employer may not aggregate a plan (within the meaning of 1.410(b)-7(b)) using the ADP safe harbor provisions of section 401(k)(12) and another plan that is using the ADP test of section 401(k)(3)

so it boils down to the question of "Can I ignore the fact the plan is safe harbor and run the ADP tests, etc if I so desire?"

I have seen no guidance on such a situation. My own opinion is the IRS is not out to disqualify plans unless there is a blatant attempt at HCE favoritism. I doubt that would be the case in a controlled group situation at least as a general rule. but I think there are other factors that come into play. everyone in the safe harbor received a 100% vested contribution and that is probably not the case in the other plan. so I imagine even if you could aggregate the plans you end up failing BRF in some way shape or form since you are failing if you don't aggregate the plans.

but those are only my thoughts and ramblings

and how you fix such a thing - make contributions 100% vested to the other plan as well??? I don't know.