Takeover Plan with a problem...

[austin3515]

So we just picked up a new plan and the prior consultants were aggregating a 403b plan and a 401k plan for the ACP test. All of the HCE's are in the 403b (and their match goes there too) and all of the NHCE's are in the 401k. So no ADP test, but we do have an ACP test.

The problem is, the 403b is calendar and the 401k has a fiscal year-end.

Any suggestions? The match is identical in both plans (small payroll to payroll calculations). Is this something the IRS would entertain allowing a fix for under VCP?

[ETA Consulting LLC]

The problem is, the 403b is calendar and the 401k has a fiscal year-end.

I get the feeling the you have already thought this through. Normally, I wouldn't see aggregation of plans for ACP testing as an issue since they are both tested under 401(m). For HCEs who actually contributed to both, those HCEs MUST be aggregated. However, it appears as if the HCEs contributed (and received match) to only the 403(b).

This situation, then, appears to be one of permissive aggregation; and they must have the same plan year in order for that to happen.

We know the 401(k) plan wouldn't be an issue because the HCE ACP rate would be 0%. The 403(b) plan may have an issue where it would've failed ACP and had to refund the excess aggregate contributions to the HCEs. I can see where a VCP submission to rework the testing could be used.

Good Luck!