Administering 1 plan for 5 companies or 5 plans

[Guest Heather Sachs]

I have a client that has 5 companies all are Sub Chapter S corps. with 2-3 people owning shares of that company. The question came up as to whether or not they could set up and administer 1 plan that covers all companies with 1 common person with shares in every company or if they should split up into 5 separate plans.

The want to set it up to allow as many of the owners to participate in the plan. If they set it up separatly, the shareholders cannot participate. But, if they were to set up 1 plan, would any of the other shareholders be eligible to participate ? Would they be considered a shareholder or would only the 1 person with common ownership be considered the sole shareholder ?

I hate tricky questions !

[LRDG]

The legal status of the business entity, Sub S Corp., disqualifies owners from participating in Sec. 125 plans, vs. a corporate entity who's "owners" are considered employee.