Restructuring a DB Plan

[JAY21]

Large medical group has 1 owner (100% of stock) and 34 doctors (all HCEs) and around 100 NHCEs. Owner wants a DB plan that EXCLUDES all HCEs other than himself and only covers the minimum NHCEs required.

I think given my 410(b) ratio is 1/35 x 0.70 = 2% times 100 = 2 that this is easy to pass by covering only a small number of ee's. Obviously 401(a)(26) is my bigger issue by needing to cover 40% of 135 employees (i.e., 54 participants).

Can I put in 2 benefit formulas in the plan doc so as to pass 401(a)(26) with one formula being 0.5% accrual rate for the bulk of the 54 participants, and then a 2nd formula being a high accrual rate (say 10%) to cover the owner and 2 NHCEs ? If I test each benefit formula separately I think each passes 410(b), one due to only having NHCEs in it, the other using the (1/35 x 0.70 x 100 = 2 NHCEs). I'm not sure if this is what people call restructuring or not (terminology wise).

I know I have a lot of flexibility here so I want to make sure I maximize it. Any thoughts/concerns/suggestions ?

[JAY21]

Actually I guess I only have to cover 50 employees for 401(a)(26), but the question still stands if this approach (2 formulas) works.

[AndyH]

It works for me.

Just a thought, however, about practicality. How long before the other Doctors want a plan? Or Doctors merge into your group and already have a plan.

This sounds like a candidate for a DB/DC combo, or a Floor/Offset, maybe safe harbor or maybe general tested.

But if you can get all those Doctors to agree to your plan, go for it. You actually have a restructured safe harbor plan.

[Blinky the 3-eyed Fish]

Also, watch out for top heavy. Based on the DB alone it sounds as if you will be okay by the sheer volume of staff covered.

[JAY21]

Good comments both. Thanks !