Partnership and C corp

[eilano]

Partnership and C corp are owned by same 3 persons (related). Partners cannot participate but owners of C corp can. Does having them together taint the 125 plan? Or can the owners defer from W2 comp even though the employees of the partnerhsip are also in the 125 plan?

[Ron Snyder]

The facts do not preclude the partners from participating in the 125 plan if they are bona fide employees of the C corporation. The plan document should specifically exclude 2% owners of the parnership, but include employees of the C corporation.