German resident living in USA on a work Visa (L1-A)

[Guest belfers@langgroup.com]

A German Company is looking to establish a branch in the US with 1 employee. The US branch will be a C-corp 100% owned by the German Company. The US branch wanted to establish a retirement plan for the 1 person company where the employee could contribute 10% and the employer could contribute 10%. I imagine a solo 401k could be established, but is there a "control group" situation here?

What should the US branch consider in establishing this account? What additional information might you need?

[jaemmons]

Technically you don't have a "solo401(k)" unless the German ee who is employed by the US subsidiary owns 100% of the US subsidiary. Otherwise you don't qualify as a "one participant" plan for IRS/DOL reporting and disclosure purposes.

You don't have a controlled group of corporations, unless the German parent company also owns 80% or more of another US based subsidiary. If they do, you may not be able to establish a plan for this ee (especially is he/she is an HCE) without taking the other er(s) into account.

Are there any other facts you are leaving out?

[Guest belfers@langgroup.com]

The German employee has no ownership and is the only employee. He will be making $80,000. The American-based C corp is owned 100% by the German corp. There are no other subsidiaries of the German-parent co. operating in the US.

I have recently been told by a TPA(although, I am not 100% certain of this) that as long as the parent company has no other operations in the US, we will not have a problem in establishing either a 401k or a Simple IRA.

Is there anything else you may need to know. I'm not sure what else may be relevent.

Thanks for your assistance!!!!!

[jaemmons]

Given the additional facts, I believe you can go ahead and establish a 401(k) plan. However, both SIMPLE IRA's and SIMPLE 401(k)'s are limited to only what is required to be contributed by the employer. In other words, the employer cannot contribute more than the 3% match or 2% non elective contribution. No additional employer contributions can be made above these amounts. See IRC 408(p)(2)(A)(iv) and 401(k)(11)(B)(i)(III)

Therefore, if the US er wants to contribute 10% to the ee, a 401(k) seems to be the only plan available to them.

[jaemmons]

Given the additional facts, I believe you can go ahead and establish a 401(k) plan. However, both SIMPLE IRA's and SIMPLE 401(k)'s are limited to only what is required to be contributed by the employer. In other words, the employer cannot contribute more than the 3% match or 2% non elective contribution. No additional employer contributions can be made above these amounts. See IRC 408(p)(2)(A)(iv) and 401(k)(11)(B)(i)(III)

Therefore, if the US er wants to contribute 10% to the ee, a 401(k) seems to be the only plan available to them.