Control Groups PLEASE HELP!!

[Guest itrade4u2]

Here is the question:

I have a client who owns two companies, we will call them company A and company B. He has wanted to start a retirement plan for some time now, however, he has a thin operating margin relative to the size of the company and he has a huge employee turnover ratio. Given the situation he wants to setup two plans- a Simple IRA for company A and a SEP for company B. He then wants to make management and middle-management employees of company B while keeping all other employees at company A. This would allow him to do three things:

1.) He will be able to use a Simple and a SEP and avoid the

prohibitive costs of a 401(k).

2.) He would hopefully be able to reduce his employee

turnover.

3.) He would be able to provide management (company b) with a

higher (and discretionary) company contribution and only do

a 2% - 3% match for the other employees (company A).

Can anyone tell me if this (all or part) can be done? I know that both companies are under the same control group, however, it is my understanding that both companies must offer retirement plans and that IRS guidelines do not mandate that the plans be exactly the same. Any help would be appreciated.

Thank You!!

:confused: