Guest CAM223 Posted March 10, 2005 Share Posted March 10, 2005 A company has a 401k plan with less than 120 participants. They have acquired a second company. When the second company's employees become eligible they will have well over the 120 participant count that requires an audit. Is there any problem in establishing a second identical plan for the new company's employees to avoid the audit requirement for both plans? Is there any problem in including all new hires in the original company in the second plan to assure that the first remains below the audit level of 120 participants? Link to comment Share on other sites More sharing options...
austin3515 Posted March 10, 2005 Share Posted March 10, 2005 As long as the assets are not commingled you should be okay. I'd issue a strong caveat that there better be a legitimate business reason for separate plans (i.e, two different companies/divisions). You don't want it to look like the point of the arrangement is to avoid an audit. I don't think that's a good way to make friends with the DOL. What's more, I'm not sure you'd save much money considering the cost of admistering two plans is probaly close to double the cost to administering one plan for everyone... Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Guest Pensions in Paradise Posted March 10, 2005 Share Posted March 10, 2005 I'd issue a strong caveat that there better be a legitimate business reason for separate plans (i.e, two different companies/divisions). Could you expand on your reasoning behind this statement. There is nothing that prohibits a company from establishing more than one plan. For example, if a company wanted to it could establish one plan for management, one plan for staff, and one plan for janitors. There does not have to be a "legitimate business reason" for doing so. Obviously the company would have to consider the higher costs of administering separate plans, but from my experience the administrative cost of a second plan would be significantly less than the cost of an audit. Link to comment Share on other sites More sharing options...
AndyH Posted March 10, 2005 Share Posted March 10, 2005 I see no reason why they can't have two identical plans, but based upon the eligibility criteria described the plans may need to be aggregated for testing purposes. Yes, it might avoid an audit but not much else, plus the cost of two plans might outweigh the savings from avoiding the audit. Link to comment Share on other sites More sharing options...
Lori Friedman Posted March 10, 2005 Share Posted March 10, 2005 SWHT Andy, I'd love to join in this discussion, but I have to go get randomly tested for steroid use. Lori Friedman Link to comment Share on other sites More sharing options...
AndyH Posted March 10, 2005 Share Posted March 10, 2005 SWHT Thanks for the SWHT! Saved me lots of time figuring out what you meant. Link to comment Share on other sites More sharing options...
austin3515 Posted March 10, 2005 Share Posted March 10, 2005 My only point is that if you design the plans solely to avoid the audit requirement that you might upset the DOL. Let's say you had one plan with 130 people, and then you break the Plan into 2 plans for no good reason. Wouldn't that raise some red flags? I wouldn't do it, that's all. No regs to cite, because there are none. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
AndyH Posted March 10, 2005 Share Posted March 10, 2005 Understood, but the counterpoint is that we don't think that the DOL would have any basis for being upset. It is perfectly within the rules. Link to comment Share on other sites More sharing options...
Kirk Maldonado Posted March 11, 2005 Share Posted March 11, 2005 Lori: Be careful of that drug use; look what happened to Blinky! Kirk Maldonado Link to comment Share on other sites More sharing options...
JanetM Posted March 11, 2005 Share Posted March 11, 2005 Maybe I need Lori's drugs.... still trying to figure out what SWHT means. Just sign me Dazed and Confused in Denver......................... JanetM CPA, MBA Link to comment Share on other sites More sharing options...
AndyH Posted March 11, 2005 Share Posted March 11, 2005 SWHT Guess Janet's been out at Zepplin concerts instead of the Boards. See Lori, guess Harwood had a point. We all need to Stop Wasting Harwood's Time. http://benefitslink.com/boards/index.php?s...ic=28029&st=30# Link to comment Share on other sites More sharing options...
JanetM Posted March 11, 2005 Share Posted March 11, 2005 Am thinking that I am still getting used to the altidude here in the Mile High City. Thanks AndyH! JanetM CPA, MBA Link to comment Share on other sites More sharing options...
Blinky the 3-eyed Fish Posted March 11, 2005 Share Posted March 11, 2005 Lori:Be careful of that drug use; look what happened to Blinky! What happened? I haven't seen a mirror lately. Am I alright? Janet, who is altidude and why do you need to get used to him? "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs." Link to comment Share on other sites More sharing options...
AndyH Posted March 11, 2005 Share Posted March 11, 2005 SWHT Page or Plant? Link to comment Share on other sites More sharing options...
JanetM Posted March 11, 2005 Share Posted March 11, 2005 opps make that altitude................ JanetM CPA, MBA Link to comment Share on other sites More sharing options...
Kirk Maldonado Posted March 12, 2005 Share Posted March 12, 2005 JanetM: Don't worry, you'll adjust to the altitude here in Denver. It only took me about 18 months to adjust. Pretty soon nobody will be able to telllllllllllllllllllllllllllllllllllllllllllllllllllllllll. Kirk Maldonado Link to comment Share on other sites More sharing options...
JanetM Posted March 14, 2005 Share Posted March 14, 2005 Thanks Kirk - 18 months? OMG that means I could still have a year to adjust. I just figure for the next few months I will always wear blue so the oxygen deprivation isn't as appearant. JanetM CPA, MBA Link to comment Share on other sites More sharing options...
Guest Willie Posted March 14, 2005 Share Posted March 14, 2005 These types of posts actually waste other people's time as well. I LOVE sports but that's not why I come to this site. I usually take a couple of minutes during my lunch hour to read these boards and it is frustrating when I have to sift through all of this banter to find legitimate answers to the posters question. Isn't there another forum on the site that could be used to discuss sports and argue with other posters over non-pension related issues? Link to comment Share on other sites More sharing options...
Blinky the 3-eyed Fish Posted March 14, 2005 Share Posted March 14, 2005 Aren't post complaining about people wasting time a waste of time themselves? I think of them like the technique of back burning a forest fire. You are actually lighting a fire, which is what you are trying to put out in the first place, and sure it could help to put out the fire and prevent further damage. However, the winds could shift and the back burn could even start a bigger fire. It always seems to be windy in here. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs." Link to comment Share on other sites More sharing options...
austin3515 Posted March 14, 2005 Share Posted March 14, 2005 I agree with Blinky. See what you've started? Now do you understand? The purpose of these boards is whatever we want it to be!! Leave your message board dictatorship political ideals at the door thank you... Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
JanetM Posted March 14, 2005 Share Posted March 14, 2005 Blinky & Austin, thank you both for making that point. A little fun and levity serves to keep us all sane........ JanetM CPA, MBA Link to comment Share on other sites More sharing options...
E as in ERISA Posted March 14, 2005 Share Posted March 14, 2005 I have had a long-standing concern with these Boards that there are some people who think that they can come here and get advice that they should be getting from legal counsel or other service providers. (It's mostly non-practioners -- those who aren't regulars -- who I'm primarily concerned about. This is not aimed at anyone on this post). I think that the Boards should be plastered with messages reminding people that any comments made here should not be considered legal advice (same as what you would see on any practitioner's web site). On the other hand, I think that the Boards are an invaluable tool for sharing news, thoughts, practical experience, opinions, interpretations among practioners with a variety of experience. And in that context, I think that a certain amount of friendly banter is to be expected. SWH&WTBFFTWKT!!! (Stop wasting Harwood's & Willie's Time But Feel Free to Waste Katherine's Time!!!) Link to comment Share on other sites More sharing options...
Guest Willie Posted March 14, 2005 Share Posted March 14, 2005 I appreciate both of your opinions and also enjoy a little humor now and then. I have limited time during the day and this site has great information. It just gets a little frustrating when you have to read so many posts to find the answer and I was merely asking if another forum within the site would be more appropriate. Link to comment Share on other sites More sharing options...
AndyH Posted March 14, 2005 Share Posted March 14, 2005 SWH&WT Thanks for the moral support, Katherine et al. Now, about those people who post pictures of MAMMALS, REPTILES, FELINES, AQUATIC CREATURES, CARTOONS, MOVIES, ANIMATIONS, BABIES, SISSIES, ACRONYMS, ETC. Stop misdirecting my line of vision which would obviously be more productive studying your thesis-like contributions and legal advice! Link to comment Share on other sites More sharing options...
BeckyMiller Posted March 19, 2005 Share Posted March 19, 2005 Going back to the question - there is an old DOL Advisory opinion. I can't remember the number, but it was issued to the Kindel & Anderson law firm, that dealt with this question. If I recall, it implied, but did not specifically hold that if one plan needed the other to be considered qualified under the Code, that the DOL would consider them to be a single plan. Link to comment Share on other sites More sharing options...
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