Are the same testing methods required for both coverage tests and non-discrimination tests?

The correct choice highlights that the same testing methods must be applied when conducting both coverage tests and non-discrimination tests. This consistency is essential because both types of tests are designed to ensure that the retirement plan complies with Internal Revenue Code requirements and is not disproportionately benefiting highly compensated employees over non-highly compensated employees.

The coverage test examines whether the plan reaches a sufficient number of non-highly compensated employees to ensure an adequate level of participation. On the other hand, the non-discrimination tests, like the Actual Deferral Ratio (ADR) test and the Actual Contribution Rate (ACR) test, assess whether the benefits provided under the plan are fairly distributed among employees.

Using the same testing methods for both ensures that the evaluation of coverage meets the same standards as the evaluation of non-discrimination. This alignment helps maintain equitable treatment across all employee classifications, thus fulfilling regulatory requirements and safeguarding against potential penalties or compliance issues.

Other responses could indicate varying degrees of requirements or applicability specific to plans, but they do not uphold the fundamental principle that both testing methods are intended to evaluate adherence to the same fair distribution standards. For compliance and fairness, using consistent methods ensures clarity and integrity in plan administration.