Code Section 401(a)(26) and One Paticipant DB Plan Maintained by One of Five Shareholders in a Medical Practice

[Guest Edward McElroy]

This looks like a simple question, but I'm stumped.

A client has 5 shareholders ... all doctors. The client is a hospital-based practice with no NHCEs. Also, there are no ASG issues. Four doctors maintain individual DC plans, while the fifth doctor sponsors a DB plan. Does the DB Plan satisfy Code Section 401(a)(26)?

Is one option for at least one other doctor to indicate that at least his DC Plan and the fith doctor's DB Plan are permissively aggregated to satisfy Code Section 410(b)? If that were to occur, then the DB Plan would also satisfy Code Section 401(a)(26).

Thanks in advance. Ed

[QDROphile]

On what basis do the shareholders maintain "individual" plans? Does the corporation in which they are shareholders sponsor 5 plans, with each assigned to a different plan, or do they each have other unrelated employment besides the corporation and sponsor the plans for the other employment?

[Effen]

You can't aggregate for 401(a)(26). The plan would need to cover at least 40% of the employees (ie:2).

How about using different benefits. One Dr. gets a big db benefit, the other Dr. gets something very small since he didn't realy want to be in the db to begin with. Just give him enough to say he is benefiting, .5%/YOS or something.

[JAY21]

Amen to Effen's comments. It's the best you can do.

[Guest Pensions in Paradise]

Before you worry about the DB plan, I would concentrate on QDROphile's questions. You may have a really big problem if each of the doctors sponsors their own plan. Because there's a good chance they're using prototype documents which don't allow you to exclude other employees.