a small company(ABC) has a 4 participant safe harbor 401. The owner of ABC is also a member of an LLC that currently has no employees other than the 2 members. The owner of ABC wants to see what he can do as far as a plan for the LLC. He is currently a participant in the ABC plan. Ultimately the employees of ABC will be employees of the LLC. my thinking is to add the LLC to the ABC plan as a participating employer via plan amendment. Next year ABC will no longer be a company and all ABC employees will be retained by the LLC. Would proper procedure be to amend/restate the plan showing the LLC as the new plan sponsor for plan document and annual filing purposes?

A question I have is do you have a controlled group. This matters because it will impact "how" the LLC will adopt the Plan.

Basically, the Plan document should have a section that says other firms can adopt as "participating employers". You should have 2 sections in the Plan, one for related (controlled group) and one for unrelated (multiple employer plan). Either way, you would have both companies executing "joinder agreements" that allow the LLC to adopt the plan in accordance with section ???? of the Plan.

Honestly, I do not know if we have a controlled group here and when I raised that question, I kind of got a blank look from the 2 members of the LLC. The employees of his company will be employees of the LLC effective 1/1/09 and the company the 1 member maintains will just remain open in order for him to receive ins. commissions. Both companies are employee benefits firms. They handle investments

It's kind of scary that an employee benefits firm doesn't understand your question about a controlled group. You also need to find out if they are an affiliated service group.

it is. it really is. its like pulling teeth to get their plan statements too. and they are advisers!!! go figure.

Aside from the controlled group and ASG issues, I wonder how you will transfer/rollover/distribute the accounts.

The LLC is not acquiring ABC Company so it is not a successor plan.

The employees apparently will be doing the same work at the same place and supervised by the same people. The only thing different is the name of the entity. Doesn't "same desk" apply ?

Is there really temination of employment ?

What is the distribution or other triggering event ?

I don't think there was a question about transferring/distributing/rolling the assets.

Odds are this is a controlled group or an affiliated service group, the LLC is added an an adopting employer, and then later the plan is restated with the LLC as the primary sponsor. But someone has to pin down that CG/ASG issue.

I agree Bird. I think we have at the very least an affiliated service here and the "new" employees of the LLC will be participants since the LLC will be added on as a sponsor of the plan.


and get this.....i couldn't get a straight answer from the LLC members or their cpa when i asked if the LLC was taxed as a partnership or sole pro, corp or s corp.

Now that our prototype document asks if there are any self employed participants, I've been astounded by the number of business owners who can't answer that same question.