Two employers (located in US) are each owned by the same parent company (located overseas). Controlled group situation. One of the employers has a 401k plan in which no HCEs currently participate. They want to establish a Plan for the other Employer. The other employer has 3 hces and 3 nhces. The new plan would not pass 410(b) coverage including all the employees from both groups. If each plan could pass coverage considering employees of all employers, then we could test each plan separately for other nondiscrim testing, right?

Any suggestions on ways to separate these employers for testing purposes? I've thought of QSLOB but one employer only has 6 employees.

1. if you combine plans for coverage you must combine for nondiscrimination
2. see #1

now a 401k plan is made up of 3 components. each has its own coverage (and nondiscrim test)
401k
401m
nonelective


in plan 1 there are no HCEs. since all nhces can defer (unless you have a real screwball document) then if you combine with plan that will have 3 HCEs and 3 nhces able to defer you have to pass coverage. everyone benefits. but the trade off is that you have to include everyone in the ADP test.

I was thinking that if each plan could pass coverage separately (counting only its employees as benefitting but counting employees of both entities in the total employee number ), then 401a4 could be tested separately. Am I incorrect?