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Multiple Employer Plan- testing compensation


mefrancis1729

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I have 2 companies that have a multiple employer plan. 

My question has to do with the compensation for the owner. I have an owner who owns 100% of Company A and 50% of Company B. This owner receives W2 compensation from both companies. I am wondering how I actually test the plan?

Do I have this owner in both companies' separate testings and give them an allocation in both? (They want to do the max) Or am i allowed to aggregate the compensation and only have the owner in one company's testing? I am leaning toward the first way as I feel they do need to be tested under each employer, but I cannot find a definitive answer anywhere.  

I do know that the 415 limit is based on the compensation the owner receives from both employers. 

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You're skipping an important first step.  Is there a controlled group or affiliated service group?  It sounds like no Controlled Group, but what ASG?

If truly a multiple employer plan, then everything is run separate.  401k and comp from A are in one ADP test with Company A employees, and the same for B. (same for all other testing).

One 415 limit because its one plan.  You should be eligible for 2 415 limits IF you had 2 separate plans.

Austin Powers, CPA, QPA, ERPA

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There is no controlled group or affiliated service group. From everything i have researched this qualifies as a truly multiple employer plan. 

They currently have a 401(k) profit sharing plan. They are looking at adding on a cash balance plan. As I did not set up the PS plan, I am stuck with what has already been established. 

Then I believe I should be testing this owner 2 times- once with company A and their compensation there and a second time with company B and their compensation at that entity. They can get an allocation in both companies under the one plan. And their 415 limit (on the CB side) is determined by a combination of all income from company A and company B. 

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There is one 415 limit per plan even if it is a multiple employer.  Interesting though there are two 401a17 limits.  So if he has comp from Company A of $270K and Company B of $270K and the plan was a 3% SHNEC, he would get the SHNEC twice.

Obviously an actuary should chime in on how a multiple employer plan is handled in a cash balance scenario.  That would be interesting...

Austin Powers, CPA, QPA, ERPA

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