It's my understanding that plans may not be aggregated for nondiscrimination testing unless they have been treated as permisssively aggregated for coverage purposes (see Treas. Reg. §1.401(a)(4)-9(a)). To be permissively aggregated, the plans must have the same plan year (see Treas. Reg. §1.410(B)-7(d)(5)).

So, now Company A and Company B are part of a controlled group. Company A's 401 (k) plan year ends June 30 and Company B's 401 (k) plan year ends December 31. If I'm understanding the regs correctly, I should never combine ADP/ACP tests for both plans. Does anyone have a different view of the regs?

Also, when performing the coverage tests under 410 (B), if I cannot permissively aggregate, what is the approach for testing coverage of the two plans?

Thanks to all that can help.

That's right, you don't aggregate them for ADP/ACP and you don't aggregate them for 410(B) coverage testing (with the limited exception that one aggregates them for an average benefit percentage test if that's part of your coverage testing).

Let's suppose that Company A's plan has a plan year ending 12/31. This plan only has HCEs as participants.

Company B's plan has a plan year ending 06/30. This plan only has NHCEs as participants.

Both companies form a controlled group.

Would Company A's plan fail coverage because I cannot permissively aggregate?

Yes, it would fail coverage. There's no solution in the regulations: you'd probably need to review IRS Rev. Proc. 2001-17 for how to fix it.