control group

[S- Milwaukee]

I have a Control group

2 plans different elig

one a SH, one not.

The plan that is not a SH fails combined testing. But there are not enough people in that plan to allocate a benefit , to pass testing.

What are my options?

[Tom Poje]

I assume you mean coverage testing.

what type of numbers are we talking about (nhce vs HCE in each plan?

[S- Milwaukee]

SH Plan non SH Plan

company 1 company 2 combined

1/4 = 25.00% 3/4 = 75% 4/4 = 100%

[S- Milwaukee]

NHCE company 2 combined 208/208 + 100 %

76/208 =36.54

135/208 = 64.90

=48.72 fails

259.62% passes

[Tom Poje]

something slightly wrong with the numbers

but it isn't going to change things that much.

135 NHCE + 76 NHCE = 211 NHCE not 208

the NHCE concentration is 98%, so if the avg ben pct test >70% you would pass.

so there is always that possibility if that is close to passing by increasing it with nonelective contributions

does the plan have less than 1 yr svc/age 21 for eligibility?

[BG5150]

something slightly wrong with the numbers

but it isn't going to change things that much.

135 NHCE + 76 NHCE = 211 NHCE not 208

the NHCE concentration is 98%, so if the avg ben pct test >70% you would pass.

so there is always that possibility if that is close to passing by increasing it with nonelective contributions

does the plan have less than 1 yr svc/age 21 for eligibility?

Only if the plan doc does not use the fail safe option for coverage, no? With fail safe language you have to correct the way the doc says. usually, it is adding people until you are covered and the ABT is not available for coverage.

[Tom Poje]

true, though in a case like this in which the plans are not aggregated, you could not add people, so then you have to do the next best thing

[S- Milwaukee]

Yes, they have less than one year of service, one is 2 months one is 3. They do have a fail safe language in the document. If they correct with adding people in with non elect, they will have to add some from the other company, because the 2nd company does not have enough people. Does the plan also need NDT testing together?

Please clarify your thoughts on the ABT? should that be ran or do you have to go with the Document for coverage? Thanks much!!!

[Tom Poje]

well,

1.401(k)-1(a)(6)(iv)(4)(iii)(B) says

you can't aggregate plans with inconsistent ADP testing methods

and it clearly states a safe harbor with an unsafe harbor

so that says you can't aggregate under the current conditions.

and we know you have to test coverage the same as nondiscrimination, so plans have to be tested separately

since plans have more lenient eligibility I would test separately (e.g. those meet 1 year svc/age 21 and those that don't)

I am assuming that would probably help.

Regardless of that, let's say you added all the NHCEs who were still ineligible and plan still fails coverage

you have done what you could using fail safe language. so now you proceed to do something else...

even EPCRS indicates you have a:

© Demographic Failure. The term "Demographic Failure" means a failure to satisfy the requirements of § 401(a)(4), 401(a)(26), or 410(b) (as applied to 403(b) Plans pursuant to § 403(b)(12)(A)(i)) that is not an Operational Failure or an Employer Eligibility Failure. The correction of a Demographic Failure generally requires a corrective amendment to the plan adding more benefits or increasing existing benefits (see § 1.401(a)(4)-11(g)

).

since this should be done with 9 1/2 months there is little time left without going through VCP.

.......

that is how I would view the situation, so of course I could be wrong.

again, I would consider testing otherwise excludables separately, which means not adding ineligible NHCEs since that doesn't solve the situation.