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Joe is a 10% owner of a partnership. He gets paid $300,000 per year from the partnership (on a K-1). The partnership has non-highly-compensated employees. Joe wants to establish a pension plan for just himself. My initial response is NO. Joe asks if it makes a difference if his $300,000 is paid to an LLC that he'll set up rather than to him directly. His hope is that this other entity, that has no employees, can establish a plan for just him. My response is still NO. Joe asks, "What if I get paid $0 on my K-1 as a passive partner, and then the partnership pays me $300,000 on a 1099 for the actual work I do; can I set up a plan for just me with this 1099 income as an independent contractor?" "Or what if I get paid $0 on my K-1 as a passive partner, and then the partnership pays $300,000 to my newly established LLC for the actual work I do; can the LLC then establish a plan for just me?" None of these pass the smell test to me, but after a while my head starts spinning. Is there some way to set this up so that Joe's plan doesn't have coverage issues?
