Employee calssifications

[R. Butler]

Corporation with 3 owners and nine other employees. Husband, Wife and Son each own 1/3. I want to put Husband, Wife & Son each in their own class. I would have 4 classifications of employees, a separate discretionary provided to each class. Classes as follows:

Class A -- President (covers the Husband)

Class B -- V. President (covers the Son)

Class C -- Treasurer (covers the Wife)

Class D -- Others

Is this permissable? I am concerned about each owner being a seperate allocation group.

[Mike Preston]

It is permissible.

[R. Butler]

Thank you. I knew theoretically it was possible, but I've read commentaries suggesting that the IRS may frown on it, so I wanted to double check.

[Guest merlin]

You're probably thinking of the part of the 410(B) regs dealing with the average benefits test that says a classification by name or that has the affect of name is unreasonable. This is only an issue for coverage if you can't pass the ratio % test-should be OK beacause your classes are for allocation,not coverage. For rate group testing a classification is reasonble if the group's ratio % is equal to or greater than the midpoint of the SHUSH corridor,so names/classes are irrelevant.

[Archimage]

Never heard the reference of the "SHUSH corridor", but I like it. Mind if I use it?

[Guest merlin]

Be my guest.Actually, I have to confess to pirating the acronym from a fellow who used to work in our office. So be his guest too. While we're at it,here's another one courtesy of Tom Poje: SHNEC.

[Tom Poje]

now you are embaressing me. (I use SHMAC as well)

SHUSH, I like that!

[AndyH]

I must be the only idiot that can't figure out what SHUSH stands for! Someone please, for the benefit of the class .........

[Guest merlin]

Safe Harbor/ Unsafe Harbor