Two Plans, one brokerage account

[austin3515]

I have a client that is a temporary staffing service and has a profit sharing plan with a decent amount of money. That plan covers all employees including the temps (if they meet the eligibility requirements).

Effective 1/1/04 they are adding a 401(k) Plan which will exclude all of the temps and any HCE’s.

They needed to do a separate plan because they didn’t want the temps to know about the 401(k) Plan. For a multitude of reasons (primarily communication) they really couldn’t roll it out for them.

All of the 401(k) money will be employer directed. They want to invest all of the money in the existing brokerage account (i.e. for the profit sharing plan) to obtain “economies of scale” on the investment side.

Page 36 of the Schedule H instructions reads as follows: “If the assets of two or more plans are maintained in a fund or account that is not a DFE, a registered investment company, or the general account of an insurance company under an unallocated contract, complete parts of I and II of Schedule H by entering the Plan’s allocable part of each line item.”

An ERISA attorney pointed that out to me, and said that doing what we want is okay.

My question is this: The profit sharing plan has an audit requirement while the 401(k) plan does not. The 401(k) Plan will be a very small portion of the assets. Are there any insurmountable complications with respect to the audit? My assumption is that limited procedures would need to be performed on the 401(k) Plan, since the commingling necessarily has implications for both plans. Anyone seen this before? Anyone have any thoughts?

The TPA will be tracking everything as if it was one plan anyway, so all of the information will be segregated at least in total, and then the investments and investment income can be allocated out pro-rata based on ending balances. All other amounts will obviously relate specifically to one of the Plans.

Any help on this would be greatly appreciated!