Restructuring

A couple of questions:

1.   When restructuring do I have to an HCE in each component group?  As long as each group passes coverage, I don't think so, but hoping to verify.  I do understand that doing that may mean plan has to pass ratio percentage test at 70%.

2.  If each rate group in the component plans pass ratio at over 70%, do I have to pass the ABPT on the whole?  Normally I wouldn't look to the ABPT if every rate group is over 70%, but in this case the only reason that is happening is because I restructure. 

Thanks for any guidance.

1. No, but I can't see how it would help to have a component with only NHCEs; since each employee has to be assigned to exactly one component, it will just reduce the number of NHCEs in one or more other components which do cover HCEs and make it harder for those components to pass coverage. Maybe I am missing something.

2. If each rate group in each component is over 70%, then ABPT is not necessary.

There are several NHCEs that are not in any rate group.  Pulling those NHCEs out and putting them in their own component plan brings the rate group %'s up an avoids the ABPT.  That was the reason for the 2nd question.

Thank you

Wait, even though they're in a different component, they're still going to be measured for the rate groups as non-benefiters.

Yes, but I have no HCEs in that component.  All of my HCEs, I left in the other component.    That is the question, can I do that to avoid ABPT?

Component plan one has all 12 HCES and 14 NHCEs.    Component plan 2 has 5 NHCEs.  Each component passes coverage.  Component plan one can pass each Rate Group at 70% with just the 12 HCEs & 14 NHCEs.  It would not pass ratio with all 19 NHCEs.  I move 5 NHCEs to component plan 2 with no HCEs.    Is that permissible?  

I agree with Bri - I think you are calculating your rate groups wrong. The percentage of NHCEs (or HCEs for that matter) benefiting in each component is the number of NHCEs (or HCEs) who are in that rate group (they have an EBAR greater than or equal to the minimum EBAR for the rate group, and they are a member of the selected component) divided by the number of non-excludable employees of the employer. Taking NHCEs out of a component doesn't reduce the denominator, so it won't improve your test.

Okay.  So just so I understand.

The ratio percentages for the rate groups are not calculated using just the HCEs and NHCEs for just the component plan, but by still using all employees of all component plans.  I know that is true for the ABPT, but I thought the ratio % test looks just to the employees in the component plan.

Let say plan has 2 HCEs & 19 NHCES.

Rate group for one of the HCEs has a ratio % of 68%  (2/2 & 13/19).   If I move 5 of the NHCEs with lower EBARS to component plan 2. I still calculate the ration % for the one HCE group using all 19 employees instead of just using the 14 remaining in component plan 1?

That's right - think about if this were really two separate plans, the same methodology applies.  It might even be a little more obvious because those 5 NHCEs really would be zeros in "plan A" rather than just treated as being part of "component B".

Thank you

agreed with comments above.  Restructuring helps when you "create" 2 (or more) separate plans which used different testing strategies to demonstrate the compliance.