Two Companies, Two PS Plans, Common Ownership

[Guest ChopperPilot]

An MD owns 20% of a medical practice(A) and 65% of another medical company(B). He will max out at $41,000 in company A's 401(k) PS plan. Can he receive another $41,000 allocation from a plan Company B would like to establish? We realize since he will defer the annual maximum 401(k) in A's plan, he will be unable to defer anything in B's proposed plan. I'm awaiting a return call from the MD to get clarification of the exact relationship, if any, between A & B. Thanx. Finally, A has many EEs, but B has none. The other owner of B is an EE of A.

[Blinky the 3-eyed Fish]

The answer lies in whether or not A and B are related employers, i.e. a controlled or affiliated service group.

If not, then yes, the MD can get PS allocations from both plans. If they are related, then the plans are effectively treated as one for the 415 limitation.

[jquazza]

Also, the two companies might not be considered related employers for coverage and nondiscrimination because they don't meet the 80% common ownership rule and can be considered related for 415 (the ownership % drops down to 50%.

[Blinky the 3-eyed Fish]

The 50% test is for parent-subsidiary relationships, which is not the case here.

[AndyH]

No, Blinky, the 80% drops to 50% for 415 purposes. Jquazza has that right.

[Blinky the 3-eyed Fish]

Andy, I am saying that the 80% drops to 50% for the parent-subsidiary relationship only, not for the brother-sister test. Do you disagree?

[AndyH]

Oops. I stand corrected. Blinky is right. Thanks for the refresher.