Existing Sep, add SoloK, Possible Controlled group

[K-t-F]

Company A has a SEP for the 2 owners and EEs. Company B wants to put in a Solo (no EEs obviously). As long as A and B are a controlled group the Solo will not fly... correct? I mean if "A" didnt have a SEP it would have to be part of "B"s plan. What if the Solo was a deferral only plan... no ER contribution.

Bottom line... can anything work?

[Belgarath]

I assume that as a controlled group, they are already contributing for B under the SEP? Assuming a contribution is made for 2004?

They could terminate the SEP for 2004 and establish a 401(k) deferral only for all participants, perhaps? But realistically, they'd probably just want to do this for 2005.

I don't think they can do anything special for this one person only, although if there are enough NHC there may be possibilities for doing something fancy. Some of the design wizards here may be able to suggest something clever if you can provide number of NHC and HC.

[Appleby]

But they could not do a Solo 401(k) / individuak (k), even if it was deferral only...

[rlb64]

I would think the SEP would have to be terminated if B doesn't want to be covered. Couldn't they both adopt their own profit sharing plan? It's just that B can't contribute more than A to pass 401a4.

[Appleby]

I agree, if A adopts a SEP, then B must be covered under the SEP, since for retirement plan purposes, members of controlled group are treated as one employer. From what I understand, this means all employees of the businesses under common control must be covered under the same plan---if they adopt separate plans, they must be combined for certain testing. But to address PATAs specific question of whether or not company B could adopt a Solo/individual (k), the answer is no because an employer may not adopt an individual (k) if common law employees are eligible to participate in the plan…and the employees of Company A would be eligible assuming they are at least age 21 and work for at least 1,000 hours per year.