Cross Testing/Coverage/ADP Test

[tjw572]

I have a plan that is performing its ADP testing by excluding the otherwise excludable employees. I know that the 410(b) testing has to be performed the same.  However, if the plan is cross-tested under 401(a)(4) for the employer contributions, does this testing have to follow suit?  Or does the 401(a)(4) testing stand on its own?

[Tom Poje]

my understanding is each stands on its own.

in other words, the old Certs advertisement, it's 2 mints in one.

you have 1 plan, but it is a 401(k) plan with match and a profit sharing so it is 3 plans in one. so this is supported by

1.410(b)-7(a) puts the term plan in quotes and refers to  a "plan"

 

then

1.410(b)-7(c) (1) The portion of the plan that is a section 401(k) plan and the portion of the plan that is not a section 401(k) plan are treated as separate plans for purposes of 410(b). similarly...401(m)...

...treated as three separate plans...

then comes 1.410(b)-7(c)(3) which speaks of otherwise excludables.

....................................

so though you have 1 plan, you have 3 plans, and therefore if you test 1 of the plans using otherwise excludable option, there is nothing that says

step 1. decide if you are using the otherwise excludable option.

step 2. now split your plan into the three tests

but rather it appears to be

1. split plan into the three "plans"

2. now decide if you want to use the otherwise excludable option

[MWeddell]

I agree with Tom above. 

I initially thought that there might be a problem based on question 43 in the 2011 Enrolled Actuaries "gray book" IRS Q&As, but that question deals with a different set of facts.

[tjw572]

Thanks for your help.