Forming a Multiple Emloyer Plan

[Guest djw]

A number of employers engaged in the same line of business in the same geographic area that are not part of a controlled group (although they have some common ownership) want to establish a multiple employer 401(k) plan. They have existing 401(k) plans. Will the creation of and the joining in the multiple employer plan be a merger of plans and/or transfer of plan assets requiring a Form 5310 filing? Same answer true for later employers joining the multiple employer plan? Thank you.

[Ron Snyder]

The group you describe is not eligible for a true single-employer plan. The best you could do is provide a multiple-employer trust consisting of separate plans and separate sub-trustsfor each adopting employer. The testing still has to be done for each employer's group separately as well as on the group as a whole. Not much advantage in creating such a vehicle unless you are ADP or Paychex and want to include it as one of your services at a discounted price in order to obtain customers.

[jpod]

They absolutely can establish a single, multiple-employer plan (to be distinguished from a collectively bargained multiemployer plan). Whether or not it's a good idea is another question given the separate testing, although there may be some economies of scale which all could enjoy.

[Guest djw]

The group you describe is not eligible for a true single-employer plan. The best you could do is provide a multiple-employer trust consisting of separate plans and separate sub-trustsfor each adopting employer. The testing still has to be done for each employer's group separately as well as on the group as a whole. Not much advantage in creating such a vehicle unless you are ADP or Paychex and want to include it as one of your services at a discounted price in order to obtain customers.

Any thoughts on whether a Form 5310 is need?

[Guest djw]

They absolutely can establish a single, multiple-employer plan (to be distinguished from a collectively bargained multiemployer plan). Whether or not it's a good idea is another question given the separate testing, although there may be some economies of scale which all could enjoy.

Any thoughts on whether a Form 5310 is need?

[jpod]

djw: Don't the 5310 instructions answer your question?

[Don Levit]

ipod:

Could this be designed as a single employer plan, because it is retirement benefits, and not health benefits?

Don Levit

[QDROphile]

You did not ask, but if you are going to form a multiple employer 401(k) plan, you need some competent securities law advice.

[Below Ground]

Ipod is correct. You can create a multiple employer plan; provided that you don't have a controlled group or affiliate service group. (In that case, you would have a single employer plan for those firms.) A multiemployer plan is for union employees.

Form 5310 should not be needed, but as Ipod stated you should look at the instructions as they do provide a fairly clear answer for the merger of 2 or more DC Plans.

What you are doing is typical done to reduce document costs and get "economies of scale" for asset concerns. Yes, testing and etc must be addressed separately, but their is only one 5500 Filing. Usually, cost for compliance work will be less since the vendor is getting several "client units" that can be serviced "together". Of course, that depends upon how you set it up.

Having done this many times I can tell you that a major concerns is "portability of benefits". If a person goes to work for another adopter, you must grant full transfer of credits for entry, vesting, etc...

Good luck.

[Guest djw]

djw: Don't the 5310 instructions answer your question?

No. I don't believe they do. If you could cut and paste or quote a specific section of the instructions that answers the question, I will appreciate it.

The correct answer to this question is important as there would be a $150/day penalty for failure to file based on the number of emploers involved). However, if no merger has taken place, there will be corresponding penalties for failures to file separate 5500s.

This is not an esoteric academic question.

Thank you

[Guest Pensions in Paradise]

The 5310-A instructions clearly answer your question. Considering the instructions for the entire form are only five pages long, and considering the relevant portion you are looking for is on page two in bold letters, it is clear you have not made any effort to locate the answer yourself.

[Guest djw]

The 5310-A instructions clearly answer your question. Considering the instructions for the entire form are only five pages long, and considering the relevant portion you are looking for is on page two in bold letters, it is clear you have not made any effort to locate the answer yourself.

Thank you.