403(B) match fails ratio/percentage (coverage test), now we're trying to test coverage under average benefits test.

Are 403(B) elective deferrals included in the test?

Maybe, more basically, do we have to test a match for 410(B)? I think so.

Yes, the matching contribution portion (and also any employee after-tax contributions) is subject to coverage testing. If you're running the average benefit percentage test for the 403(B) plan, then yes elective deferrals to the 403(B) must be included in the ABP test.

Code Section 403(B)(12) and IRS Notice 89-23 are the relevant authorities for these questions.

Thank you for your response and the cites.

While it does appear that a match program must be tested for 410(B), it is still not clear to me that 403(B) deferrals would be included in an average benefits test because 403(B)(12)(A) (i) says "a plan meets the nondiscrimination requirements of this paragraph if ...... with respect to contributions not made pursuant to a salary reduction agreement, such plan meets the requirements of .......and 410(B) in the same manner as if such plan were described in section 401(a)."

But, a 401(a) plan being tested on average benefits would not have 403(B) deferrals included in the test, thus the dilemna.

I am skeptical of any nondiscrimination requirement for 403(B) plans including the salary reduction component because salary reduction in 403(B) plans is not subject any nondiscrimination requirement under the IRC other than the availability test. It would be inconsistent to apply a 410b test to s/r contributions to determine if the av. benefit test is met when there is no corresponding requirement that the sr conributions be made in a non discriminatory manner.

If the 410(B) plan were a 401(a) plan, then the 403(B) deferrals would be contributions to a 401(a) plan other than employee after-tax contributions. I believe the most reasonable interpretation is that 403(B) elective deferrals are included in the average benefit percentage test for 403(B) deferrals.

mbozek is apparently not alone in disagreeing with my viewpoint. Q&A 4:19 from the 403(B) Answer Book (Panel Publishing) states "The salary reduction portion of a 401(k) plan is included, but it is not clear whether the salary reduction portion of a 403(B) plan is likewise included. [Treas Reg § 1.410(B)-5(d)]"

OK, so...
If an employer has both a 401(a) plan -- let's say a money purchase pension plan -- and a 403(b) deferral-only plan, and you are testing the 401(a) plan under the average benefits percentage test, do you include the 403(b) deferrals?

No, if you are running the average benefit percentage test for the qualified plan, you don't include the 403(b) elective deferrals.