FAQ 670: DB/DC combo 401(a)(4) gateway test; Actual vs. Average

Problem: There are two sets of gateway calculations - one for the "actual" rate and one for the "average". I understand that the regulation provides an average option to use the average of the equivalent normal allocation rate for those benefiting under the DB plan. If this is the "average" - then why are the non-HCE rates different in this column? Shouldn't they all be the same?

Solution: The average is for the DB portion only, so different DC rates can result in different average rates in the Gateway test. For example, while most participants in the DC plan received a 5% allocation, several participants were new entrants. Based on their entry date and their compensation, the system calculates a DC allocation rate based on post-entry comp, which is double on 7/1 entrants. In addition, participants who have no current accrual in the DB plan cannot use the average rate so the rate for them is the DC rate only.