410(b) Testing with Control Group

[Rose]

We have a client that maintains 2 plans with us, one of which uses safe harbor match and the other that does not use a safe harbor contribution.  They became a control group 2  years ago and we have relied on the transition rule to avoid coverage but that is expiring.  What happens if the plans will not pass coverage to be able to be tested alone and technically need to be tested together? I know you are not able to aggregate plans for testing when one is safe harbor and one is not.  At this point, they do not want to change the plan design of either plan so we are trying to figure out how to fix this if coverage fails.

[C. B. Zeller]

When talking about coverage testing, don't forget about the average benefits test. Depending on the size and demographics and contribution rates, this might be an easy win.

Assuming that coverage is not going to pass separately, then they will have no choice but to change their plan designs. Obviously they could make both plans safe harbor, or make both plans ADP-tested. Or they could merge the plans into one, which would be either safe harbor or not. Other options might include fixing the coverage test by excluding some HCEs, or giving additional benefits to NHCEs.