another combo test

We are working with another TPA on a combination straditional DB with 401(k) SHNE - no PS.

There are 5 employees, 2 principals, 3 NHCEs.

For some reason, it was decided to exclude on of the employees from the DB, but he is included in the 401(k) with the SHNE contribution.

I believe both plans can be tested together so 410(b), 401(a)(4) and 401(a)(26) can pass, but would the excluded employee be included in combo testing?

When you are testing the plans together, what you are really doing is treating the DB plan and the employer non-elective portion of the DC plan as a single plan for testing purposes. Is the employee benefiting under that combined "single" plan? The answer is yes if they have an allocation in the DC plan or an accrual in the DB plan (or both). Are they included in the benefiting group for purposes of the coverage test? If they are benefiting, then yes, unless they are part of the plan being disaggregated for some reason, for example, an otherwise excludable employee. Can they be excluded from the nondiscrimination test? Not if they were included in the benefiting group for the coverage test.

Well, just to supplement this, and I know Mr. Zeller knows this, but the excluded participant must be in the non-discrimination tests whether they are benefitting or not, unless they could be excluded for age or service.