Multiple employer plan and Safe Harbor

[PMC]

Employer maintains a safe harbor plan. They are acquiring a number of new employees via an asset purchase. They do not want to provide the safe harbor contribution to those newly acquired employees and have been told they can operate part of the plan as safe harbor but yet go through all of the testing requirements for the "non-safe harbor" part of the plan. I have never heard of 1/2 safe harbor plan. Any comments?

Same employer as above wants to include a related employer (does not rise to controlled group or affiliated service group) creating a multiple employer plan. Their intent is NOT to have the part of the plan for this other employer be safe harbor. Since each employer in a multiple employer plan is basically considered maintaining a separate plan for testing purposes, can a multiple employer plan operate as safe harbor for one employer and not safe harbor for the other?

[JanetM]

If done right you can do it. You have to pass coverage, that is the key. You can exclude a group by class, ie those employed at specified location or those employed at certain jobs. We currently do this by naming a specific location in Georgia. No one at that facility gets safe harbor.

Not sure on the second part.

[Below Ground]

Quote: "Same employer as above wants to include a related employer (does not rise to controlled group or affiliated service group) creating a multiple employer plan. Their intent is NOT to have the part of the plan for this other employer be safe harbor. Since each employer in a multiple employer plan is basically considered maintaining a separate plan for testing purposes, can a multiple employer plan operate as safe harbor for one employer and not safe harbor for the other?"

Yes you can do this. You just need to make sure that plan document language allows for this flexibility. For example, it is fine if document says "if employer adopts provisions and provides notice safe harbor will apply", while a plan that simply says "safe harbor match will be... " will probably not allow this. Of course I paraphase language, but that's the idea.

[QDROphile]

You will probably have securities law compliance issues if you have a multiple employer 401(k) plan.

[Guest Pensions in Paradise]

QDROphile - ???

[JanetM]

QDROphile pease explain that. We have couple multiple employer plans at our company - resulting from sale of a entity to another corporation. I don't know of any issues this raised outside maybe having company stock in the plan.

[QDROphile]

Go to the Securities Law Aspects of Benefit Plans forum and look at a thread started on April 29, 2005. The securities law exemption that applies to excuse 401(k) plans from registration does not apply to multiemployer plans. Company stock is irrelevant, although employer securities in the plan is another circumstance that can cause a 401(k) plan to be subject to registration. In addition to the Securities Act issues, the plan might also have Investment Company Act issues.

[austin3515]

You mentioned multiemployer plans, but this is a multiple employer plan?

[QDROphile]

Sorry. I meant multiple employer plan, as I stated correctly in my first post.