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I assumed she was working in the pension industry and had to get the ADP tests completed - in other words, she has hours like the rest of us this time of year.

Company A is owned 50/50 by John and Jim, who are unrelated to each other. It is a manufacturing firm and John and Jim are also the primary salesmen for the company, they also generate sales thru a couple of independent manufacturers reps who are paid strictly on commission. Company A employs about 50 people. Suppose John and Jim decide to set up a separate company B to be another manufacturers rep. Company B will be owned 100% by John, so it is not a CG with company B. The only two employees of Company B are John and Jim. Company A pays Company B, which then pays John and Jim and generous commission for the sales they generate. Company A and B are both incorporated. John and Jim manage company A and continue to draw a salary from A for their employment there. A, as a manufacturer, is clearly not a service organization. Company B is in sales, not typically considered a service org and clearly not a professional corp. So no A-Org ASG is possible. No B-Org ASG without a service org. Principal business of B is sales, not management of A, so no management services ASG. John and Jim set up a cash balance plan in company B that covers the two of them. Seems too easy, but absent some required aggregation of A and B, it seems to work. What am I missing?

Unless I am missing something the plan is not subject to universal availability. The plan should seek legal counsel.

Found a pie shop around the corner who said they were open 22/7.

No, the language in another plan, whether qualified or non-qualified (as is your example) cannot override the language in the 401(k) plan with respect how it should operate. For example, an employment agreement some new employee signs says he will be immediately eligible for the retirement plan while the plan document says there is a one year wait - which do you follow? The plan document. If this employer wants to exclude that income from the 401(k) plan compensation definition then it must do so by modifying that plan document, not some other plan document.

It seems like a terrible idea, but in theory could be done with the right plan language, probably a plan amendment. The contribution would fail 401(a)(4) unless one or more NHCEs got a similar (but potentially lower) contribution as a percentage of pay and you satisfied the general test.

I used to see it quite often in physician employment contracts. But it's been awhile now since I've seen the last one. I've always told them that an employment contract doesn't override the plan document and ERISA. It seems most attorneys are starting to realize that.

Or "Well, we have a couple of employees we have never told you about because their employment agreement excludes them from all benefits so they were never eligible for the plan anyways...."

similar to the one we get a lot from our small employers..."We hired a new: 'CEO/Controller/or insert title' and put in the employment contract that she/he can participate immediately in the 401(k) plan even though we require a year of service. Is that going to be a problem?" Happy New Year All!

Perhaps altering the contract to provide that those contributions be made to a non-qualified plan, rather than the 401(k), would help.

Me too! I've seen it done for a small company that was acquired by a larger company. Once I ran the numbers to show that it would require an additional $1 million to other employees in order to pass non-discrimination, several attorneys' heads began to roll. Good Luck!

I've seen it, and agree it is a bad idea. Under certain circumstances, it might be do-able, but it's certainly ignorant to put that in a contract with no input from the plan side.

In the 1990s I saw a contract that obligated the employer to allocate, each year, to the chief executive's individual account under the employer's retirement plan the amount of the IRC 415 annual-additions limit. The negotiator must have thought at least some about how that obligation related to coverage and non-discrimination conditions: The contract specified also obligations that the employer provide, pay, and allocate contributions for all participants' accounts so that the plan would, during the chief's employment and throughout the year of her separation, be a tax-qualified plan. And the contract specified that the chief was an intended beneficiary of the promises regarding contributions for all participants as needed to keep the plan tax-qualified. The employer delivered a copy of that contract to the plan's recordkeeper and told it to design the least expensive plan that would meet the obligations to the chief executive.

it seems like they did not bother asking their ERISA experts what they think of this provision before writing.

I cannot comment on the 401(k). As for the health plan, the usual answer is no, you cannot waive the waiting period. Check you plan documents for eligibility definition. What you can do for this person is pay the cost of his/her health insurance until they do become eligible.