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Good afternoon to all, We have a prospect that has about 1800 employees, mostly in lower paid jobs, in the service industry (think restaurants as an example). Of the 1800, only 600 would be eligible if we use 1 year of service, dual entry, age 21. There are 12 HCE employees. All these employees are spread out over several corporations, but they are all owned by one man, so it's a controlled group. They have been presented a standard 401(k) plan with a safe harbor match to cover everyone and have rejected it. What they say they want is a deferral-only 401(k) plan for the NHCEs and a separate "carve out" plan (their terminology, not mine) that benefits only the HCEs for which the company would be willing to provide a match. We are somewhat aware of the existence of Non Qualified Deferred Compensation plans but our understanding of them is that they have so many drawbacks that they are not very popular anymore. We don't really think that the 12 HCEs will appreciate their contributions being a general asset of the employer, being subject to taxation if they leave and take the funds, etc. We understand that the contributions could be put into a Rabbi trust, but even then, they are still subject to the claims of creditors if the company experiences bankruptcy. All that makes this look like a doubtful solution. Are we missing some cutting edge, new plan design possibilities within the world of qualified plans? How have you addressed such requests, if you can share? As always, your comments and experiences are much appreciated.

Good morning to all, A client, which happens to be an Indian reservation, has a commercial entity that sponsors an ERISA covered 401(k) plan. That commercial entity has no HCEs. The employer decides that overall for 2017, it will contribute 5% as a profit sharing contribution for the year. Per the plan document, profit sharing is totally discretionary and is supposed to be allocated on a salary ratio basis. However, each division within the company is responsible for being a profit center and one division says it doesn't have the resources to make any contributions for 2017. This means that about 2/3 of the employees get a 5% of pay contribution and 1/3 of the employees get nothing. Again, there are no HCEs. Top Heavy status is not an issue. Passing 410(b) coverage testing is not an issue. Does anyone see any problem with this? Is it permissible for the 1/3 to get nothing in profit sharing for the year? Your thoughts and suggestions are always appreciated! Thank you.

A client with a 401(k) plan has only 3 participants, consisting of himself as owner, his wife, and one rank and file employee. I am just now finding out that the owner and the rank and file employee are employed by the sponsoring corporation, while the wife is technically employed by her own LLC. For many years all 3 of them received deferrals, Safe Harbor, and profit sharing contributions. However, for 2017, they want to give only the wife the profit sharing contribution. I say this is discriminatory and they can't do that. The CPA says that because the wife's contribution is made by her separate LLC and not by the sponsoring corporation of the plan, it's ok for her to have a profit sharing contribution while the rank and file employee does not. I am thinking that the sponsoring corporation and the LLC are a controlled group belonging to the husband and wife and that they are still running afoul of non-discrimination rules. I am also thinking that a participating employer addendum to the plan's adoption agreement should have been in place for the LLC all these years. 1) Can they give the wife a profit sharing contribution and nothing to the rank and file employee and 2) Can a retroactive participating employer agreement be created dating back to the time that the LLC started making contributions on her behalf? Thank you for any comments!