Benefit Rights and Features - controlled group

[Uncle Jack]

There is a controlled group with 5 plans in it.

 

Plan A and Plan B need to be permissively aggregated in order to pass 410b coverage testing.

 

As a result, when performing the ADP/ACP test, we combined Plan A and Plan B.

 

Plan A and Plan B have different matching formulas and as a result we need to perform a BRF Test.

 

When performing BRF Test, is the denominator based on the entire controlled group or just the combined Plan A and Plan B?

 

[Tom Poje]

I have never seen the issue addressed before. My guess is that you only include those plans actually aggregated for testing the ACP test, because you only use those bodies in the ACP test, and so you are now testing to see if the match formula favors the HCEs (even if you pass the ACP test, rather than coverage. but I could be wrong

[Uncle Jack]

Hi Tom,

I agree when performing the ACP Test it is quite clear that if Plans A and B are permissively aggregated in order to pass 410(b), the ACP Test is performed on a combined basis (like a single plan) and the controlled group has no impact on the ACP Test. I also understand from your response that under the BRF, you are trying to determine if the match formula used for the ACP Test favors the HCEs. Therefore the BRF should not include the controlled group.

But doesn't 401(a)(4)  provide that the current availability of a BRF is tested under the nondiscriminatory classification test used for coverage testing. This is the first part of the average benefits test which is tested on a controlled group basis.

I think we all agree that if a plan had a New Comparability formula, the general test for this plan must be performed on a controlled group basis even though it passes 410b. Similarly I would think if I had one plan that had two different matching formulas, the BRF Test should also be done on a controlled group basis. The only carve out is the ADP and ACP Tests which can be done without regard to the controlled group once it satisfies 410b.

I prefer your answer but I am concerned about the controlled group.

 

[Tom Poje]

as I indicated, I am not 100% sure.

on the other hand, let's say the plan fails ADP test and there are deferral refunds. you then have to test BRF to make sure that the rate of match the HCEs receive is greater than the NHCE rate. I have never heard it indicated you have to look at all plans of a controlled group even if they were not aggregated for testing. it is only the participants in the actual plan being tested.