ADP/ACP Testing

background

Controlled Group -

Company A - Non Safe Harbor

Company B - Safe Harbor

Plans do not pass coverage on their own.  Can't aggregate since one is Safe Harbor. Understand need to get coverage corrected before moving the ADP/ACP Testing.

When the ADP/ACP Test is done, doesn't company B need to be included in the ADP/ACP Test? The ACP test would be the match they received under the SH while the match for Company A is their discretionary match. Somewhere I recall the Safe Harbor status is "lost" when the plans are combined for testing purposes.

My understanding is that you cannot aggregate for coverage because one is SH and the other non-SH; therefore, you cannot aggregate for ADP/ACP. You need to amend Company B and/or A to bring in more NHCEs into the Plan to pass coverage (which may necessitate bringing in Company A employees into Company B's Plan or Company B employees into A's Plan). These NHCEs would be due a QNEC. Also, note that coverage failures need to be corrected within 9 1/2 months of the plan year end.

You could try passing coverage under the average benefits test (ABT), instead of the ratio test, if you haven't already. You need to check your plan document, though, to ensure you can use the ABT. I recall Darrin Watson stated that if you document uses a fail-safe to correct coverage, you are precluded from using the ABT.

7 hours ago, #toomanyrules said:

I recall Darrin Watson stated that if you document uses a fail-safe to correct coverage, you are precluded from using the ABT.

I don't know the exact context but I suspect his statement was more along the lines of "check the document carefully, because your document may say that if you fail the ratio test at 70%, you have to use the failsafe provisions to bring people in" -- that is, you have to follow the document, and if the document says to bring people in even if you could potentially have passed the ABT with the original population, that's what you have to do.

Hi Duckthing - correct, that is what I was intending to say. If your document says you must bring people in, then you can't use ABT, even if ABT would have passed