General Test with Grouping (5% for NAR, 15% for MVAR)

[truphao]

I am curious how comfortable practitioners using Grouping with 410(a)(4)?

For example, one owner, one employee.  If employee's MVAR is 12% how comfortable is to give the Owner MVAR of 13.80% (=12 x 1.15)?  What is the interpretation of "significant" from the https://www.law.cornell.edu/cfr/text/26/1.401(a)(4)-3?

[Hojo]

I don't use grouping unless there is more than one HCE and more than one NHCE.

[CuseFan]

Agree, I definitely would not do that.  You are stretching to the maximum 15% MVAR range, how is that not significantly higher?

Also, in all the past sessions I remember attending, the presenter said you never an HCE at the top of the group, or certainly not at the top of the top group. 

[truphao]

That is the essence of my question.  How do practitioners interpret "significantly" in that context?  

[Nate S]

On 2/2/2023 at 3:16 PM, truphao said:

That is the essence of my question.  How do practitioners interpret "significantly" in that context?  

Well, one IRS memo says you have to consider "intent" but of course 401(a)(4) itself says to adher strictly to the mathematics. So, mathematically, 5% is significant, therefore keep it below 4.99%.

[truphao]

Thank you all for the input