How are Highly Compensated Employees determined in Multiemployer plans? For the ownership %'s, is it ownership with a single employer? For the dollar threshold, it is based on compensation earned from ALL employers within the multiemployer plan?

Example #1: John Jones owns 100% of ABC Co. His son, Jake, is a member of a union that sponsors a multiemployer plan. Jake earned $50,000 for the 2004 calendar year, working all year for ABC Co. He clearly doesn't meet the dollar threshold. Would he be considered an HCE in the multiemployer plan due to attributed ownership?

Example #2: Mike Smith is a member of a union that sponsors a multiemployer plan. He works for Company A for 5 months and makes $48,000. He works for Company B for 7 months and makes 60,000.
Is his compensation combined for the year ($108,000) for HCE determination purposes?

What is the reason for your question. Why does it matter?

Assuming the benefits are collectively bargained, there are generally no discrimination issues within the multi-employer plan.

ADP Testing

You have a multiemployer plan that has a 401(k) option? Now I'm really confused.

How do they handle salary deferrals? Did the employers agree to payroll deductions? Does each member really have the option to defer any amount they choose? Are you sure it is really a 401(k)?

Many multiemployer organizations have profit sharing or money purchase plans that they often refer to as "annuity plans". These annuity plans require a set amount of money to be deposited per hour ($.50) for each member. They are often treated like 401(k)s in that the men may have control over the investments, and since they agreed (through negotiations) to the contribution rate, they may even think of it as a 401(k) plan, but in reality the $.50/hour is employer $ and the plan is just a profit sharing plan.

I have never heard of a multiemployer 401(k) plan. I would be interested to know more about it, if it really is one.

The IRS addresses multiemployer 401(k) plans in some of their plan examination guidelines, as has the DOL in some media releases.

There are also a number of other resources such as this book.

interesting.... have you ever worked on one?

For good or ill, I do not have any practical experience with a multiemployer 401(k) plan.

Does anyone know the answer to the original question? I am working with a multiemployer plan that has over 100 employers. There is a guy who owns 100% of one of the 100 companies and earns about $40,000 a year. Should he be considered HCE for the ADP test, considering he is a 100% owner? Even if he only has ownership stakes in just one of the companies?

Aren't owners barred from participating in multiemployer plans?

In a multiemployer plan, the plan sponsor ususally is the Joint Board of Trustees. HCE status therefore generally is determined by compensation within the bargained unit. So the answer to question 2, would be the total from both employers. I have been the consultant to a collectively bargained 401k Plan for over 10 years. None of the participants owns any of the businesses that are participating employers and none of the members have (or had) total compensation that would have made them HCEs.

The owner definition of an HCE is ownership of the plan sponsor. Since the UNION is the sponsor of a multiemployer plan, and the union is an association without 'owners', I don't think you can get an HCE through ownership. Note that the employers who contribute to the plan are not sponsors of the plan as that is defined for single or multiple employer plans. At least not in my humble opinion.

Very nice. The union serving as the plan sponsor makes perfect sense. Thanks for the replies...

Isn't the joint board of administration/trustees considered to be the sponsor of a multiemployer plan?

It does not change the analysis. You are talking about the Joint Board of Administration/Trustees of the UNION. The trustees of the PLAN/administrator of the PLAN would not be considered the sponsor because they run the plan and are composed of union members and employer members. This second group is formed after the plan is formed.

The link for the book returns an error. It goes to the site, but the page can't be found.

Well, the link is over three years old.

If memory serves (an unlikely occurrence these days), the book was The Multiemployer 401(k) Defined Contribution Plan Guide by Larry Bushmaker et al.

Try this link.

rcline,
I agree that the end result in this scenario is not changed. However, I disagree with how you get to that result.

My understanding is that the collective bargaining agreement creates the plan, as well as the joint board of admin/trustees (of the plan, not the union), and that the joint board is considered to be the plan sponsor. In most, if not all, situations, the joint board is also the plan administrator for ERISA purposes (not unlike the situation where a corporation sponsors a plan and is also designated as the plan administrator).