2 companies/2 plans?

[Guest Michael Anderson]

Do 2 different companies with common ownership HAVE to have the same benefit plan available.

Company A is own by 6 people and Company B is owned by 4 people (all who have ownership in Company A). Company A is a larger company and has a 401(k) Plan that does not currently have a match. Company B has the same plan, but is a smaller company that has not been doing to well and would like to terminate the Plan - because of the common ownership can they do that?

Thank you.

[E as in ERISA]

What are the ownership interests in A and B? You don't have to worry about common ownership unless it is significant enough to be a controlled group or common control. In general, there must be 80% common ownership between the two, and at least 50% of that must be identical ownership.

Even if the businesses are under common control, they don't necessarily need to have similar benefits. If each plan passes coverage separately, each can generally have its own benefit structure. They would generally pass coverage independently if the percentages of nonhighly compensated employees in each plan are similar. (Or if company A has more nonhighly compensated employees, that works too).