Controlled Group Testing when Participant / Owner is not eligible?

[Dougsbpc]

Facts: 

Suppose you have a husband and wife with no kids living in a community property state. Also, suppose he owns 82% of his corporation with no employees and is eligible for his companies' retirement plan. She also owns 82% of her corporation has 3 employees except she is not eligible for her corporation's plan. 

Question: 

A controlled group seems to exist here but would both plans need to be aggregated for testing when she is not eligible for either plan?

Thanks.

[Bill Presson]

Eligibility/participation in the plan doesn't eliminate controlled group status though it might give you more coverage flexibility.

[pmacduff]

unrelated question...why is she not eligible in her own plan?  We're in the small plan market where the plan is normally set up specifically to try and maximize/benefit the owners, so I'm curious as to the reasoning.

[CuseFan]

You need to use the control group's non-excludables in your denominator, so if you have husband HCE as only person covered in plan A, then that plan will fail coverage and need to be aggregated with wife's company plan B.

[FPGuy]

For what it is worth, assuming control group status is conferred by community property rules, so-called Secure Act 2.0 repeals attribution with respect to spouses with separate businesses in community property states, but unfortunately not until 2024.