What rule prohibits using the top-paid group election for one test while opting out for another in the same plan year?

The correct answer is the Consistency Rule, which mandates that if an employer chooses to use the top-paid group election for one nondiscrimination test, it must apply the same method for all relevant tests within that plan year. This ensures that there is uniformity in how the plan is administered and assessed for compliance with nondiscrimination requirements.

The rationale behind this rule is to prevent selective application of testing methods that could lead to discriminatory practices, ensuring that all employees within the plan are treated equitably regarding the benefits and contributions they receive. This principle upholds the integrity of the retirement plan and protects the interests of all participants.

In contrast, other rules have different focuses. The Eligibility Rule deals specifically with determining who meets the requirements to participate in a plan, while the Coverage Rule relates to ensuring that sufficient levels of employees are covered by the retirement plan. The Compensation Rule, on the other hand, refers to how employee earnings are defined and calculated for contribution limits and benefits within the plan. Each of these rules serves distinct functions, but the Consistency Rule is specifically designed to uphold fairness and uniformity in testing practices.