Dentist with Multiple Corporations

[DP]

Dr. X is a dental client who has three separate dental practices. Each practice is a separate corporation with Dr. X being the sole shareholder of all three.

If Dr. X would establish Safe Harbor 401k plans for his practices, would he establish three individual plans?

Dr. X has an associate dentist who works at two of the practices. The associate's combined compensation between the two practices is in excess of $205,000 annually. To calculate the associate's contribution would I look at his compensation from each practice individually, or is all his compensation lumped together?

Dr. X's wife also has her own dental practice where she is the sole shareholder. What if she wanted a Safe Harbor 401k plan for her practice?

Help!

[No Name]

I'll take the first crack at this, just to move it back to the top of the list.

Dr. X obviously has a controlled group. A Standardized prototype would insist that all members of the group be covered. I don't see a problem with all Corps of Dr. X adopting one plan.

Dr X's wife's corp may also be part of the group. There is a non-involvement "out" that may come into play, but not if in a community property state.

Instructions to the 5500 indicate that, if the wife's corp were to adopt the same plan, you would NOT call this a multiple-employer plan, unless it was NOT a controlled group.

I'd be tempted to pro-rate associate's comp form the corps by the $205k limit to calculate his/her Safe Harbor contribution.

[Blinky the 3-eyed Fish]

I will add my two cents. There is no reason why Dr. X's corporations can't jointly sponsor one plan. Each person's salary will be what they earn in total between the corporations, limited to $205,000 in total. No prorating between corporations.

The wife's company may or may not be part of the controlled group. Factors to consider are IRC 1563(e)(5), whether there are minor children and whether or not it's a community property state. You really need a legal opinion to make this determination before putting in any plans.

[DP]

Thanks to both of you for your advice. Now, please help me with this.

The associate dentist makes $150,000 in Corp. A and $180,000 in Corp. B. How would you calculate his 3% Safe Harbor contribution for both corporations?

Would it be a contribution of $2,795.45 (45.45%) to Corp. A and $3,354.55 (54.55%) to Corp. B? This would give him a 3% Safe Harbor contribution total of $6,150.00 (3% x $205,000) for the plan year. Each corporation would be deducting their share of his contribution.

Thanks.

[Blinky the 3-eyed Fish]

They are related entities, so my understanding (and keep in mind I am not a CPA) is that they can contribute or deduct it however they want and the two don't even have to match up.