Old Cross teted Question

[Hoard1]

Old question that i need to clarify.

If Employer establishes a 401(k)Plan with different matching rates of each group of employyes:

1. Must the plan be cross tested under 410(B) and 401(a) 4

2. What test would be required for 401(a) 26?

3. Does tha that provision take you out of a proto type document and create an individually designed document?

[Guest]

401(a)(26) is no more for DC plans. delete from mind. erase from memory banks.

the rate of match is not really a cross testing issue, but the concept is the same. its a benefits , right, and features issue.

suppose you have 3 rates - 5 years or less, 6 to 10 years, more than 10 years.

numerator = # NHCEs in the rate of match group

denominator = total number if NHCEs

do the same for the HCEs

[Hoard1]

Sapose that it was set up with different matches for each related employer who adopted the plan.

What about coverage under 410(B)? Would you test the Plan using each seperate benefit right or feature:

For Example - Related employer #1 100 ee's 10 HEC 90 NHCE

Related employer #2 200 ee 20 HEC 180 NHCE. Each Related emploer has a differnt match rate. To test group #1 would it be: HCE 10/30 = .33 NHCE = 90/270 = .333 Plan passes

Is this type of provision permissable in a proto-type document.

[Guest]

You have a controlled group, so here are the options as I understand them.

#1 10 hce, 90 nhce

#2 20 hce, 180 nhce

for coverage I can combine evrything and have 100% coverage for 401(k) and 401(m) - assuming no hour or last day condition for match.

for ADP / ACP test I also combine everything.

or

for coverage I test as 'two' plans. actually 4 since I will have 401k and 401m for #1 and 401k and 401m for #2. I have a total of 300 in the 'denominators'

which for all practical purposes will produce the same results as your benefits, rights features.

for adp/acp I test only those in the particular group. thus # 1 has only 100 ees in test and #2 has 200.

your example comes from an ideal world. my experience has been to have plans in which most hces tend to be in the best matching plan. I usually end up with one group being around 25%, but because of high concentration of NHCEs the safe harbor % is around 23%

[Hoard1]

Tom if you have Time would you look at the Advance Plan design Q & A post of May 27, 1999. I think that there is a difference conclusion to this question.

Thanks

JTS

[Guest]

not sure how to answer your question without further info.

your original question asked about 'different rates of match'.

just what is meant by that term? (guess I would want to see more of an example)

I am not sure if my answer disagrees with the Q & A you sighted. it depends on the terminology used.

If you have the ERISA Outline Book there is an example on page 11.194 of the 1999/2000 edition of different rates testing.

[Hoard1]

Tom. That's right on target and what I was looking for. Thanks for the help