Multiple Employer + Controlled

[Guest Rachael L.]

My co-workers and I are currently working on a new transfer plan. The document has the plan set up as a multiple employer (with adopting employers). Each adopting employer has a separate set of eligibility requirements..and 3 out of the 4 adopting are a brother sister controlled group. The TPA that this plan is transferring from has been running this plan as three separate plans and has submitted 3 separate Form 5500s and related schedules. Now my understanding is that a multiple employer has only 1 Form 5500 submitted and controlled groups are tested together. Is this correct?

Now if the employer decides to stick with the 3 separate plan setup... they will need to have 3 separate documents, one for multiple employer to cover the 4th company, correct?

Any advice would be greatly appreciated!!

-Rachael

[Guest Ken C]

In my experience with multiple employer plans eligibility is determined as if there were only one employer. Per IRC 413© the plan must apply the minimum age and service requirements under 410(a) as if the employers are a single employer. As such, how can you have different eligibility requirements for each employer when you are required to treat the plan as one for eligibility purposes?

The plan is only treated as having separate employers for testing purposes. The different employers can choose different testing methods - current yr vs prior yr - even safe harbor on non-safe harbor, but files 1 5500. In the past each employer filed separate schedule T, with schedule T gone 1 Schedule R is filed with line 9 boxes checked as needed to cover all ers.

I am at a loss to decide how to now start filing only 1 5500 without generating letters for missing returns in the future - at the same time am curious how IRS or DOL didn't notice the connection between the multiple returns in the past.

I am also concerned about new documents to continue treating as 3 plans without researching spin-off and successor plan issues.

I have seen comments in the past from some who say a multiple employer plan is almost impossible to operate in compliance with all regulations - and I'm beginning to agree.

- Good Luck.

[rcline46]

This may be a Master plan, not a Multiple Employer plan. It works here.

However, for the controlled group, either each of the three members must constitute a 410(b) group on its own, OR there must be some aggregation of plans for testing. Now that is a fine mess you have.