Grouping of rates/EBR's under 1.401(a)(4)-(2) and (3)

The regulations give mathematical certainty as to what constitutes an acceptable "range."

However, there is that annoying caveat that says as long as the allocation/accrual rates of the HCE's within the range cannot generally be significantly higher than the allocation/accrual rates of the NHCE's within the range.

I've always found this troubling. What is "significantly higher" (especially since the range is limited anyway) - is there any guidance on this? Thanks.

Editing typo...

no real guidance so  I suppose it is facts and circumstances

so if the HCE is at the HI range and the NHCE is at the low range that probably doesn't pass a smell test.

if you had an HCE close to the midpoint and an NHCE at the HI point and an NHC at the low point that would probably be ok 

I see the Grinch has returned! Thanks Tom - that is sort of what I was thinking. Have you ever seen or heard of this being raised by the IRS in a real-life situation? I never have, although I'm not certain how often it would really be a serious problem anyway.

I guess that depends on how often plans are getting audited by the IRS

many moons ago I had someone call me about a plan being audited. The old Pentabs system, but Relius is the same. there is a check box 'plan passes avg ben pct test' Might be useful if running component plans or something like that, but apparently someone had checked this box and the plan didn't pass avg ben pct test, so of course the IRS was not pleased with the testing results. I asked to see the data, turns out the rate group was close to  70%, maybe grouping  accrual rates would have worked, but that would have been 'significantly' higher with the HCEs - I'm sure, especially with an agent looking at the data.. fortunately they were close enough that switching from age def last to age definition nearest was enough to make a difference and they didn't need to group rates to pass testing

but that doesn't mean I told the guy he could get the plan to pass." Let him suffer" is my motto. after all, I am still a Grinch.

just kidding, though I never did hear back from the guy.

I generally do not want an HCE to have the highest MVAR and NAR within a permissible rate band, but if one is higher and the other is lower then I'm less concerned. Although with multiple rate bands for multiple HCEs I only try to push that envelope  once.