Catch-up contributions and QSLOB's

[Guest tom mathews]

How do the "universal availability" rules for catch-up contributions apply for companies that are in a QSLOB? Must all plans in a QSLOB offer catch-up contributions, even though the plans are tested separately for non-discrimination?

[MGB]

QSLOB rules have no applicability to the universal availability rules. Everyone in the controlled group must have them, you cannot limit to just a QSLOB.

[Guest tom mathews]

I guess I was under the impression that the universal availability rules allow for passing the nondiscrimination rules under IRC Section 401(a)(4), and since QSLOB's can pass Section 401(a)(4) separately, then the rules would require only that all members of the QSLOB to offer the catch-up option, not all members of the controlled group.

Thus, requiring all members of the controlled group (irrespective of QSLOB elections) to offer catch-up contributions goes against the general treatment of QSLOB's as separate for purposes of the nondiscrimination testing under Section 401(a)(4)?

[PMC]

What about an employer who also maintains a plan just for their union employees and the union plan doesn't allow for catch-up, or the union plan does and the non-union plan doesn't?

Does the statutory exclusion under 410 meaning anything for catch-up purposes?

[MGB]

No.

If the union does not want catch ups, then the rest of the controlled group cannot have them either.

Note that there is a transition period (see last paragraph of proposed regulations) for union contracts. You can put in catch ups in other plans now without the union as long as the contract was in existence on 1/1/2000. If the union does not have catch ups in their plan within one year after the contract expires, then the rest of the controlled group can no longer have catch ups.

[jaemmons]

Philip: Union and nonunion ee's are disaggregated for ALL testing purposes, so catchup may be offerred to one group and not the other, without affecting qualification status.

Et al: If members of a control group are considered QSLOB's, then each is disaggregated and tested separately for BRF's. Universal availability of the catch-up provisions apply to mandatorily aggregated groups (including ASG's, Control groups, and in "true" multiple employer plans). Since QSLOB's are not mandatorily aggregated ( if they are then why go through the QSLOB determination) each can elect to have catchup apply to their specific employees.

[MGB]

jaemmons,

Although your conclusions make obvious sense, that is not how the IRS sees this. They tried to make it very clear in the proposed regulations that they have no authority to allow what you are describing. Universal availability under the statute applies to the entire controlled group, period (except for Puerto Rican plans).

Numerous discussions with Treasury personnel (Sweetnam, Drigotas, etc.) have repeatedly confirmed this.

[jaemmons]

MGB,

I stand corrected, after having just reread the proposed regulations. Sorry for any miscommunication.