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Can a member of controlled group split from it's plan?


Lori H

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a 3 member controlled group operates under a 401(k) plan that provides uniform benefits and provisions to all 3. One member brought up the suggestion of having their own plan due to the fact they had a Standard Industrial Classification (SIC) code. I have never heard this.

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The company could have it's own plan provided it passes all IRS discrimination testes based on all employees of the controlled group.

If it is large enough I might meet the QSLOB rules.

I've never heard anything about having their own SIC code having any real meaning with respect to Qualified Plans.

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Would the benefits, rights and features of the SIC plan have to mirror that of the other members of the controlled group? If it satisfied QSLOB(more than 50 employees, 5310-A, etc) could it have for example a different matching formula?

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  • 1 month later...

If they QSLOB's, yes they can do whatever they want. Mind you, must meet the nondiscriminatory classification test, but then it wouldn't be a QSLOB if you couldn't meet that.

Even if not a QSLOB each plan can still do whatever it wants provided they meet all of the coverage requirements. So if the SH plan disproportionately benefits HCE's it probably would not work.

Austin Powers, CPA, QPA, ERPA

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