An employer has an existing calendar year profit sharing plan and wants to implement a defined benefit plan in 2002. The plans would be tested together for nondiscrimination and coverage. The only participants in the DB plan would be the 2 owners. The other 2 participants would benefit in the PS plan.
My question is: because the two owners are currently participants in the profit sharing plan, would the 404(a)(7) limits have to come into play in 2002 or would an amendment to the PS plan at this time eliminating their participation be allowable to have the 404(a)(7) limits not be considered? I would think they were stuck except for the fact that the employer could always implement another PS plan and achieve the same results.