ADP Testing for Controlled Group

Facts:  Company X and Y form a controlled group.  X has a 401(k) plan,  Y does not. 

To pass coverage for the Co. X 401(k) plan, the RPT passes by disaggregating otherwise excludible employees of both companies while treating employees of Co. Y as not benefitting. 

Question:  When performing ADP test for Co X 401(k) plan am I required to carve out the otherwise excludible employees or can I run an aggregated test including all eligible employees of Co. X?

Thanks!

the general rule is whatever you have done for coverage you must do for any type on nondiscrim testing

Tom,

Thanks for your response!  I understand the general rule.  The question comes up because the testing group is different:  for 410b I am testing ees of X and Y (and it passes on an otherwise excludible basis).  Since 410b passes I can run ADP test for ees of Co X only.  I would like to run ADP test aggregating all ees of Co. X (including otherwise excludible ees of Co. X).  Can I do that? 

I believe you are saying no?

that is my understanding. if you pass 410b (for 401k) using otherwise excludable option, then you use otherwise excludable option for ADP testing as well. consistency rule.

the one rule the IRS never really addressed, what if you use the special 'treat all HCEs as includable, even if one of them is normally otherwise excludable. they didn't change coverage to be the same as ADP testing in that scenario

What's to address?  You have it right: it is an ADP option, not a coverage option.

If I understand PensionPro's question correctly, it appears to be governed by Treas. reg. sec. 1.401(k)-2(a)(1)(iii), which says that if the plan used 410(b)(4)(B) to pass coverage (which I think PensionPro is saying it did), then it needs to disaggregate the early eligibles for ADP as well. You have a choice as between either (A) disregarding (a form of disaggregation) only the NHCEs who were early eligible, but including the early eligible HCEs, or (B) running ADP separately for all regular eligibles (HCEs and NHCEs), on the one hand, and all early eligibles (HCEs and NHCEs), on the other.