Money Purcchase Contribution

[Fred Payne]

Client's attorney failed to terminate his MP plan in year 2002 before he signed onto a multiple employer plan that is 401(k) and cross-tested. Since the 401(k) is a Safe Harbor Plan and he deferred, there are funding obligations to two, but not paired, plans.

First step I assume is to figure his and his staff's contribution to the Money Purchase Plan. Next step I assume is to calculate the cross-tested calculation. When I do so, does the MP contribution get factored into the calculation of the EBAR? If his total contribution could have been made into the cross-tested Plan, he would have only passed the cross-test resorting to the Average Benefit Percentage Test. (He fails the Ratio Percentage Test.)

Your expert guidance is appreciated as always.

[AndyH]

Fred, perhaps some more information could encourage some responses. Who is in the "multiple employer" plan, and what is the relationship of other entities to your client? Are they considered separate (not controlled or affiliated) or not? If separate, must they be aggregated for 415 (the 80% standard drops to 50% if my memory works)?

The short answer to your question is that if the benefits from the new plan are aggregated for coverage, they are aggregated for nondiscimination, and thus included in the EBAR. If they are not aggregated for coverage, they are not aggregated for 401(a)(4) and thus not in the EBAR.

But there are side issues such as 415, benefits, rights and features, and the question of who of the new plan sponsors must be included if you aggregate to consider.

[david rigby]

Another possibility is that the original plan was frozen? Probably no requirement that it be terminated.