Controlled Group - Different Eligibility

Let's say there are two plans in a Controlled Group:

1) Plan A - 3 months of service required for eligibility

2) Plan B - 6 months of service required for eligibility

Question 1) How would the coverage testing be done to determine if the plans can be tested separately? Would you use the appropriate eligibility for each plan (3 months for Plan A and 6 months for Plan B) for coverage testing purposes, or would you use the more lenient eligibility (3 months) to determine who is eligible and benefiting for coverage purposes? This question only relates to coverage testing done to determine if the plans can be tested separately.

Question 2) Let's say the plans pass coverage testing on their own and can be tested separately for non-discrimination purposes. In this case, it's my understanding that the eligibility requirements can stay as is and don't have to be the same for both plans. So, Plan A can still have the 3 month eligibility requirement and Plan B can still have the 6 month eligibility requirement. Since they pass coverage testing separately, the eligibility requirements don't have to be consistent. Is that correct?

Question 3) Let's say the plans fail coverage testing on their own and must be aggregated. Would Plan B be required to change its eligibility to 3 months (the more lenient eligibility requirement between the 2 plans)?

Thank you.

1)  You would indeed use the more lenient eligibility between the two plans.  So in your coverage testing group, it's everyone with 3 months.

2-3)  This answer will depend on the nature of the contributions/benefits under the plan.  But the eligibility provisions don't need to be uniform.  It's just that plan B might have a few more people in that 3-6 month range who aren't benefiting.

Have you considered separate testing for employees who haven't met the maximum age/service conditions of 410(a)?  That could throw all these newer employees into a separate test, maybe with no HCEs anyway.

Agree with Bri - you can take advantage of the disaggregation using the statutory minimums in your coverage testing

1) Appropriate eligibility for each plan to see if they pass separately. (Can test under 21/1 group separately for each plan to see if both portions pass for both plans- and if so, can continue to test each plan separately without aggregating).    

You only need to include those with 3 months of service under both plans if aggregating plans for testing (which you said you are not). 

2) Correct. 

3) When running combined coverage test use most liberal eligibility requirements (3 months) for both plans to determine those who can be excluded due to minimum age/service, but you would not be required to actually change plan B's eligibility to 3 months unless combined plan still fails coverage excluding the 3-6 month group for plan B and bringing all of those 3-6 month people excluded from plan B would be necessary to pass coverage. (Before you think about amending plan B's eligibility requirement to 3 months in a corrective amendment - make sure you test using otherwise excludible group rule to test combined plan under 21/1 population separately to see if the combined plan can pass on that basis without amending eligibility for plan B). 

On 6/2/2022 at 1:48 PM, bito'money said:

1) Appropriate eligibility for each plan to see if they pass separately. (Can test under 21/1 group separately for each plan to see if both portions pass for both plans- and if so, can continue to test each plan separately without aggregating).    

Right. I assume you're asking about ratio percentage, in which case, to see if one or both pass(es) separately, use 3 months for numerator (benefitting) and also 3 months for denominator (all employees in controlled group , whether covered or would be covered by Plan A or Plan B) for Plan A, and conversely 6 months when testing Plan B. In other words, to see if they pass separately, each plan is tested as if they other did not exist. See Treas. Reg. 1.410(b)(5)(A) and (B).