Multiple Employer Plan and 401k Safe Harbor

[J Simmons]

Can a multiple employer 401k plan permit each employer to provide (or not) a 401k safe harbor notice for a plan year for just that employer's employees? or must it be plan-wide or nothing?

Since 401k testing in a multiple employer plan is an employer by employer issue, it would seem that whether to safe harbor against that testing would also be permitted on an employer by employe basis, provided the 401k safe harbor notice specified it applied only as to the employees of the participating employer providing that notice.

Does anyone know if there's IRS ruling to the contrary?

[Trekker]

We had an individually designed 401(k) plan which allowed a couple of non-controlled group members to adopt the plan, making it a multiple-employer plan. All controlled group members had to operate with the safe harbor, but the two non-controlled group members chose not to. The plan document specifically named them and stated that the safe harbor provisions did not apply to them. If they ever wanted to take advantage of the safe harbor, the plan would be amended.

We never had a problem with this.

[J Simmons]

Thanks, Trekker. Did the MEP get a determination letter from the IRS that the safe harbor could work in this fashion, i.e. that the non-controlled group employers did not have to do safe harbor although the controlled-group employer was?

[Guest gfowler]

I have considerable experience with MEP and I have received a favorable determination letter on them with the Safe Harbor being an option for adopting employers, but not a requirement.

[austin3515]

ADP has their Total Source plan (a giant multiple employer plan) which presumably thousands of plans have adopted. You would think they wouldn't have much of a business if that wasn't an option (along with many other things). I figure their document would look a lot like a prototype, where each employer completes their own"adoption/adoption agreement" of the total source basic plan document. Anyone ever seen one of their documents?

[Trekker]

J Simmons - sorry for the delay in replying. I haven't checked the board lately.

Yes, we did receive a DL on the amendment that specifically carved out the non-controlled group members from the safe harbor.

[Guest Jim K]

You are correct. Most PEOs offer considerable design flexibility on an adopting employer by adopting employer basis. Some offer New Comparability, Integrated, Age Weighted, Age Neutral, etc. As long as you keep Benefits, Rights and Features in mind, the arrangement can be extremely flexible and in the case of Nww Comparability - much less expensive than going it alone. Most MEPs are either individually designed or Volume Submitter docs. Always look for the Letter of Determination as there are differences in opinion on how some transactions should be handled depending on the practitioner that you ask...Good luck.

ADP has their Total Source plan (a giant multiple employer plan) which presumably thousands of plans have adopted. You would think they wouldn't have much of a business if that wasn't an option (along with many other things). I figure their document would look a lot like a prototype, where each employer completes their own"adoption/adoption agreement" of the total source basic plan document. Anyone ever seen one of their documents?