Catch up contributions and separate lines of business

[Guest kbs]

I understand that under the new proposed regulations, if one member of a controlled group offers catch up contributions, all other employer plans in the controlled group that provide for elective deferrals also must offer catch up contributions. The regulations, however, are not clear on whether the exception for qualified separate lines of business applies. Does anyone have any insight on whether or not the universal availability rule would require all plans of a controlled group, even if they are maintained by separate lines of business, to offer catch up contributions?

Thanks.

[MGB]

I was in a conference call with Elizabeth Drigotas of Treasury (she was one of the lead authors of the proposed reg) on Wednesday.

There is no relief for separate lines of business. They (Treasury) feel they are bound by the statute that is clear that the entire controlled group is subject to the universal availability requirement.

That does not preclude the possibility of a change by Congress through a technical corrections bill or other legislation in the future. However, they need to become aware of the issue from companies that want this relief. Otherwise, we are stuck with the law as is now written.

By the way, it is clear in the proposed reg ("employer" in the referenced regulation is defined as the controlled group; separate lines of business are in a different regulation):

(5) Other definitions. (i) The terms

employer, employee, section 401(k)

plan, and highly compensated employee

have the meanings provided in

§ 1.410(B)–9.