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Focused Topic 01: Average Benefit Test: The Other Coverage Test
Presentor: Stephen Forbes Recorded Date: 9/3/2013 Duration: 60 Min.

This program was recorded during a live presentation on September 3, 2013.

Average Benefit Test: The Other Coverage Test
Tuesdays with Derrin and Steve

Although the vast majority of plans pass coverage by using the ratio percentage test, the need to apply the average benefit test often comes up in critical situations and may be the difference in maintaining qualification. Practitioners who fail to master the average benefit test may be undertaking unnecessary plan amendments or expensive corrections.

The average benefit test also is frequently used to maximize disparity in cross-tested plans (i.e., under the general nondiscrimination test). Furthermore, practitioners must use the first step in the average benefit test (nondiscriminatory classification test) to test benefits, rights and features. So, as you can see, a practitioner just can’t practice effectively without a command of this test. In this presentation, using case studies, the speaker walks you through the test on a step-by-step basis so that you have the tools necessary to apply this test when applicable.

Topics include:

  • Mechanics of the average benefit test
  • Nondiscriminatory classification test
  • Reasonable classification test
  • What plans have to be aggregated?
  • Average benefit percentage test
  • Testing on an allocations basis
  • Testing on a benefits basis
  • Benefits, right and features
  • Use in rate group testing
  • Building the fractions
  • Nonexcludable employees

Prerequisites: There are no prerequisites or advance preparation for this program. The instructor will assume attendees are familiar with performing the ratio percentage test for coverage.

Level: Intermediate

Instructional Delivery Method
Group - Internet-Based

Speaker - Stephen W. Forbes, J.D., LL.M.
Author of The 5500 Filing Guide

Objectives: After attending this Web seminar, an attendee should be able to:

  1. Apply the average benefit test
  2. Use the average benefit test in nondiscrimination testing
  3. Determine which plans to aggregate
  4. Determine how to aggregate plans with different eligibility provisions
  5. Apply the test to benefits, rights and features testing
  6. Identify excludable employees
  7. Apply test on a benefits basis

Hardware System Requirements:


  • Windows 95, 98, NT 4.0, 2000, XP, Windows 7
  • Internet Explorer 4.01 or later, Netscape 4.08 or later, and set Internet browser to allow pop-up windows.
  • High-speed Internet connection.
  • Pentium 166+ MHz, 128MB RAM or more.
  • 1023 x 768 or higher display resolution.
  • Soundcard and Speakers.

Software Requirements:

Program related requests, questions, or concerns may be emailed to: