Reg. § 1.401(a)(26)-7 Testing methods.
(a) Testing on each day of the plan year A plan satisfies section for a plan year only if the plan satisfies section on each day of the plan year. An employee benefits on a day if the employee is a participant for such day and the employee benefits under the plan for the year under the rules in .
(b) Simplified testing method A plan is treated as satisfying the requirements of of this section if it satisfies section on any single plan day during the plan year, but only if that day is reasonably representative of the employer's workforce and the plan's coverage. A plan does not have to be tested on the same day each plan year.
(c) Retroactive correction If a plan fails to satisfy section for a plan year, the plan may be retroactively amended during the same period and under the same conditions as provided for in through to satisfy section . A plan merger that occurs by the end of the period provided in § l.401(a)(4)-11(g)(3)(iv) is treated solely for purposes of section as if it were effective as of the first day of the plan year. The rule of this may be illustrated by the following example.
Example. Assume that an employer with 500 employees maintains two defined contribution plans. Plan A benefits 45 employees. Plan B benefits 50 employees. Immediately before the end of the period provided for in , the employer expands coverage under Plan A to benefit 20 more employees retroactively for the plan year. Thus, Plan A satisfies of this section for the plan year. Alternatively, before the end of the period provided for in , or later if a later period is applicable under section , the employer could merge Plan A with Plan B to satisfy section .
[T.D. 8375, 56 FR 63418, Dec. 4, 1991]