Control Group issue...

[Guest jusducki]

A company owns five different firms throughout the US. All are independently run, have different names, etc. The CFO of one of the firms wants to offer a 401(k) plan to his employees. Would it be required that the other 4 firms also offer a 401(k)? Is the answer different if the CFO of each of the five firms owns 25% of their respective company? Thanks in advance for any insight....

[BeckyMiller]

It is possible to offer a 401(k) plan for just one enterprise within a controlled group. You need to satisfy IRC Section 410(b) based upon the eligibility standards of the 401(k) plan when looking at all of the employees of all members of the controlled group, not based upon participation.

But, if there are other retirement plans within the controlled group, you need to make sure that offering the 401(k) doesn't disrupt any testing of those plans.

It sounds like you might have access to additional flexibility under the separate line of business rules, but my general advice is not to go there unless you have to.

Also, watch out for prototype documents in this fact pattern. In some cases, you end up including folks that you never intended.

So - yes, possible, get an advisor who know the controlled group rules and the related testing standards.

[Guest jusducki]

Thanks, Becky, for making the time to answser my question. For surely I'll get a control group guru involved before doing anything on this....