affiliated service group after tax deferral

I have a client who is the owner of a business - who also provides consulting service as a separate company to said business.  He is owner of both businesses.

Business number 1 is set up as a Safe Harbor Non-Elective plan with 10 employees.

The client wants to contribute his max deferral (comp $350k) of $23,500.00 plus receive his 3% NE SH of $ 10,500.00.  So for business 1 - he would have contributed (or received from the company a total of $34,000.00.

In business 2 - the client is the only employee - he wants to set up an After Tax contribution in the amount of $36,000.00 so he can max his total contributions at $70,000.00 for the year.

He also earns a separate $350k in this business.

So...After Tax contributions are tested in the ACP test of business 2 - but since the plans do not have to be aggregated for ACP Testing - what is to stop him from doing this?  It seems like he could just skip providing any Employer Contributions to business 1 (outside of the SH NE 3%) without failing any testing.

What am I failing to see?

Thanks!

1 hour ago, Nic Pospiech said:

but since the plans do not have to be aggregated for ACP Testing

This is true, but since the two companies are an affiliated service group, they must be considered a single employer for coverage testing. The NHCEs in Business 1 are not benefiting in the match/after-tax portion of the plan so the NHCE coverage ratio is zero and therefore the coverage test will fail.

Actually, if he owns both then it's a control group rather than an ASG, but treatment is the same. 

Yes...that is it.  Thanks all!  We don't deal with a ton of After Tax plans....so I knew that this was to simple...but just wasn't thinking the process through.