using integrated formula instead of cross testing

[Pixie]

I have a safe harbor new comparability plan.  They are unable to pass average benefits test due to one of the owner's 90% deferral rate.  Therefore new comparability isn't working.  Can we shift to an integrated format and bypass the average benefits test?  We pass coverage, etc.

[duckthing]

You'd still have to pass general testing if the document does not specify a design-based safe harbor allocation method, even if your allocation "looks like" one.

Prior discussion at

.

[CuseFan]

You don't HAVE to cross-test. A new comp formula should allow you to allocate in whatever fashion (that satisfies 401(a)(4))) the employer desires. So you can allocate in a manner that satisfies 401(l) - integrated - and do your testing on contributions rather than cross-test on benefits. Technically, you would have to test, but if your actual allocation was in the same manner as a design based safe harbor, I wouldn't even bother. Say you had a NCPS formula but allocated X% of pay across the board - formula is not safe harbor but your allocation is.

[Bird]

Agree with prior responses.  This might help (or make it more confusing...):

You do NOT have a "safe harbor new comparability plan."  (Even thought your document may call it that in the Adoption Agreement!)

You have a plan where you can (presumably) allocate any amount to any person, so long as it passes testing and limitations. 

Most of the time, you will pass testing using a "New Comparability" testing methodology, where you are comparing benefits for HCEs to benefits for NHCEs.  Every once in a while, that may not work, but you have another option, in some ways a more direct option, to test on a contributions basis.  You may impute permitted disparity.

FWIW, "old" comparability was based on RR 81-202 (as in...from 1981), and "new" comparability is based on the 401(a)(4) regs, first proposed in 1991, I believe.  Those who understood and used RR 81-202 started calling the rules "new comparability" and it stuck.  I still have a paper copy of a special study from RIA, prepared by TPF&C (Towers Perrin...?).  Don't take this history lesson to mean I knew a whole lot about it back then (or perhaps now).

Having said all that, I suppose an argument could be made that all testing, whether benefits based or contributions based, could be considered "new" comparability because it was all "new" - but historically, "old" comparability was using benefits based testing on contributions. 

[CuseFan]

It is funny that "new" comparability has been around since 1991.

Also, for your testing, don't forget about restructuring. if you can pass rate groups at 70% by cross-testing the owner with the youngest NHCEs and testing the other HCE (spouse I assume because high deferral?) on a contributions basis with the oldest NHCEs, then the ABT% doesn't matter.

[Tom Poje]

CuseFan - but be careful

while restructuring may be possible, it still requires everyone getting the gateway

testing everyone on an allocations basis has no such requirement

[CuseFan]

yes, absolutely, if cross-testing any part of the plan then everyone must get gateway.