Testing basis for ABT

A CB/DC plan passes coverage using the ratio percentage test. For my 401(a)(4) testing, some rate groups are less than 70%, so for rate group testing I need the average benefits test to pass. Can the average benefits test pass on an equivalent contributions basis, while the  a4 rate group testing is being done on a benefits basis?  

Yes, but if you are rate group testing on a benefits basis it is probably easier to pass the ABT on a benefits basis, as well.

another way of looking at it, if it helps.

let's suppose you were going to split the plan into 2 (component plan testing) and test one part on an accrual basis and the remainder of the folks on an allocation basis. there is still only one average ben pct test including everyone [1.401(a)(4)-9(c)(4), despite the fact for rate group testing some are tested one way and other are tested another way.

So, Tom:

I am doing component testing, and I have a small group I'm testing on a contributions basis and another group I'm testing on accrual. Do I have to pass 1) rate group testing on the second group by ratio method or 2) the entire plan on the ABPT?

Mike, this plan has an unusual fact pattern. Of 8 total HCE's, 4 are children of the owners and under 30 years old. They get a very small CB contribution but I'm trying to get them some PS. Due to their age their benefits basis EBAR is much larger than the contributions basis EBAR, and the ABT fails on a benefits basis but passes on an equivalent contributions basis.  The kids and some NHCE's are going to be a component plan for testing. The plan as a whole and each component plan passes the ratio percentage test. Thanks for your help.

Tom, thanks for the cite! 

BG5150

Let's suppose you had 2 separate plans (e.g. controlled group) and you were going to NOT test them together

You still have one avg ben pct test combining all plans, just in case either plan fails ratio % and you need to rely on the avg ben test.

so you look at Plan 1, run your testing on whatever method you choose.

you do the same for Plan 2.

Component Testing is really no different. in this case, you have 1 plan, but you split it into 2 as if you had 2 separate plans,, with the advantage you assign each participant to one or the other.

.............

Cloudy - interestingly enough when I first posted I didn't include the reg cite, which for me is a no-no. so I went back and added it. I try very hard to remember to include such items, even if it means looking it up again and again....

I remember working at Pentabs in 1992..................barely :)

I had a 5 year 'prison' term and then escaped

Mine was shorter. DB tech sppt was way harder than DC.  - Joking :)

So, to be clear, if one of my component plans fails the ratio test, I'd have to test BOTH component plans TOGETHER using the ABT.

my understanding

you have 2 plans

you have 1 avg ben pct test.

now look at plan 1 (either testy on accrual or allocation basis)

if it passes the ratio % test, then you won't need the avg ben pct test.

if it fails ratio pct test then use the avg ben test.

now do the same with plan 2. (either test on accrual or allocation basis)

Bummer.

My second plan does not pass the ratio test, and combining the two for ABT in no good either.  I'm going to have to shift some of the people from the accrual group to the contribuions group.

:(