There are several types of employees that do not have to be considered in the Reg 410(b) coverage testing. One of those types is "EMPLOYEES of an employer which is part of the controlled group but which is considered a separate line of business".

What does "separate line of business mean" ?

I find it hard to believe that if a car dealership and a private hospital are members of a controlled group ....then the employees of the hospital are excluded from the coverage testing when the car dealership's defined contribution plan is being tested, soley because the two employers are not in the same line of businness.

See 414® and the regulations. A lot of the rules are designed to make sure that benefits aren't designed in favor of highly compensated employees. The SLOB rules acknowledge that there may be variances in benefit designs based on differences in expectations about compensation and benefits among employees in different industires or geographic locations. So there may be a legitimate business reason for the differences in benefit design.