Niceguymike Posted October 13, 2020 Share Posted October 13, 2020 Client neglected to mention that the ownership for their company had changed to 50/50 between Owner A and Owner B. Further, Owner B owns another company 100% and the plan's census has "always" included comp from this other company in calculating allocations. I don't think there is a controlled group, because identical ownership isn't greater than 50%; however, I think it wasn't appropriate to include comp from, essentially, an unrelated company (until 2019). I *think* what I need to do is amend their plan to include the other company as a participating employer back to at least 1/1/2019 and/or amend the plan to allow employees to participate through the comp from the other company. Your thoughts? Link to comment Share on other sites More sharing options...
FORMER ESQ. Posted October 14, 2020 Share Posted October 14, 2020 Niceguymike: What definition of compensation does the plan currently use for calculating allocations? What type of plan is this (e.g., individually designed PS, etc...)? Link to comment Share on other sites More sharing options...
Luke Bailey Posted October 14, 2020 Share Posted October 14, 2020 For purposes of 415 the threshold for controlled group (but only for parent-sub controlled groups) is reduced to "more than 50%" from 80%. See IRC sec. 415(h). You can't use compensation from an employer that is not a plan sponsor in determining compliance with 415 limit. Also, the benefit that the individual receives is a larger percentage of the compensation that you can actually use, effectively giving him or her a larger benefit than similarly situated person without proportionate compensation from other entity, so you may have a 401(a)(4) problem. It is likely also inconsistent with your plan document, i.e., was just a naïve interpretation of plan provisions. Consider EPCRS. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034 Link to comment Share on other sites More sharing options...
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