Does the budget proposal related to ERSAs affect any other defined contribution plans?
Yes. The proposal includes the following provisions that would greatly simplify the administration of all defined contribution plans: 1. There would be a single test to show that the plan meets the nondiscrimination rules with respect to coverage — ratio-percentage coverage.Under this test, the percentage of an employer’s nonhighly compensated employees covered under a plan would have to be at least 70% of the percentage of the employer’s highly compensated employees covered under the plan.The other coverage testing alternatives would be repealed. 2. Permitted disparity and cross-testing would be prohibited for defined contribution plans. 3. The top heavy rules would be repealed for defined contribution plans. 4. There would be a uniform definition of compensation for all purposes for defined contribution plans – the amount reported on form W-2 for wage withholding, plus the amount of ERSA deferrals. 5. A simplified definition of highly compensated employee would be adopted under whic
