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Of course, you must first pass the coverage test under Interal Revenue Code Section 410(b). To properly run this test you need to answer a few questions first (here are just a couple of them): 1. Are the two companies a controlled group (who is the other 50% owner and how are they related to you)? 2. Are the two companies an affiliated service group? If the two companies are considered to be an affiliated service group or a controlled group, then you must consider the employees in both companies when determining whether or not coverage passes. As ETK indicated, just because you have a controlled group (or an affiliated service group), that does not require both companies to be covered by one retirement plan. If you can still pass coverage with one company excluded, then you are not required to cover that company. As you can imagine, Congress makes exceptions to the rules and they (or the folks at the Treasury Department) make exceptions to the exceptions, and so forth - which can change everything mentioned above. Also, certain plan documents might require all members of a controlled group or affiliated service group to be covered by a plan if just one employer adopts such plan. So, be careful out there!

My turn to be persnickity - there ain't no such thing as a 401(k) plan, and we all know it. There is a profit sharing plan with a cash or deferred arrangement attached to it under IRC 401(k). So, for tjt169, if you are asking if you can add a mandatory contribution feature to a plan that has a 401(k), then yes. However, you cannot make the ability to do 401(k) (pre-tax or ROTH) dependent on making mandatory contributions (which are after tax). You can make receipt of the profit sharing component of the the plan dependent on mandatory contributions. For non-union plans, mandatory contributions have pretty much disappeared.