Can an employer change their coverage test for otherwise excludable employees back to aggregated after disaggregating?

The option indicating that an employer can change their coverage test for otherwise excludable employees back to aggregated on a year-by-year basis is grounded in the flexibility granted to employers under certain conditions when conducting their coverage tests.

Employers have the discretion to determine how they administer their retirement plans, including the approach they take to coverage testing. The regulations allow for annual elections regarding whether to aggregate or disaggregate coverage for certain groups of employees. This means that an employer can assess their employee demographics and their overall plan objectives each year, making necessary adjustments to ensure compliance and operational efficiency while fully navigating their responsibilities under the law.

This ability fosters adaptability, allowing employers to stay in compliance with legal protections and regulatory requirements while considering the changing dynamics of their workforce. As workforce composition shifts or as business needs evolve, the option to adjust coverage testing methodologies yearly can be crucial for effectively managing contributions and meeting the eligibility goals outlined in their retirement plans.

In summary, the correct perspective is that employers can indeed change their coverage tests for excludable employees each year, allowing for a responsive approach to plan management.