BrownTrout

I have a similar situation except no parent company. Company A is 100% owned by an individual and has 3 employees (including the owner). Company B is 50% owned by the individual and 50% owned by the individual's spouse (clearly a controlled group). Company B has 25 employees (including both of the owners) Company A has had a 401(k)/PS plan in place for many years; Company B adopted Company A's plan effective 1/1/2021. Next year, will Company A file one Form 5500 and include consolidated info for Company A and Company B. Or do Companies A and B have to file separate Form 5500s?

Similar question, but different thought... Can a plan be amended to provide an additional level of employer contributions based on the compensation earned by eligible employees over the eight week window? For example, can an employer provide a non-elective contribution based solely on compensation from 5/1/2020 through 6/30/2020. I realize that testing will need to be done on annual comp, but I'm trying to think of other reasons why this may not be a valid approach.

Thanks Larry. The plan has not yet been adopted and my never be adopted. The client doesn't yet have a plan and says he doesn't want to put one in place until after the entity change (not sure why...been trying to convince him that it makes sense to do so now). Just trying to get my ducks in a row since I'm sure I won't hear about the entity change until after it happens ? The client will definitely want to include prior service and the portion of comp that's earned in the sole proprietorship so sounds like the S-Corp will adopt the new plan (when that time comes) but the sole proprietorship will need to also sign on as a participating employer. I appreciate the feedback!

Thanks!

I've looked all over the boards here and still can't seem to find a definitive answer to this question so I thought I'd take a crack. Facts: Company is a sole proprietorship on 1/1 On 7/1, company changes to an S-Corp. No change in ownership (the former proprietor owns 100% of the new S-Corp shares) and no change in business operations. Change in entity was done for tax purposes only On 9/30, S-Corp adopts a 401(k) plan with effective date of 1/1 Questions: Does service with the sole proprietorship count toward service eligibility for the plan even if the plan docs don't specifically call out the sole proprietorship as a participating employer? Is compensation earned by participants under the sole proprietorship included in plan comp for the year? Seems like such simple questions and common sense tells me that service time should count and comp should be included since the only change made was for technical tax reasons (i.e., no change in ownership and no change in operations). However, I've looked and looked and only find conflicting information. Any clarifying thoughts would be appreciated!