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401k/403b same employer


Guest JWhit

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Guest JWhit

A client is a 501©(3). They wholly own 5 other organizations. They sponsor a 401k plan for the 5 children + the parent

AND they sponsor a 403(b) plan for just the parent. All participants from the child companies are excluded from the 403(b) because they are eligible for the the K. When they do ADP testing on the K plan, all of the parent employees (many of whom are HCE) factor in a zeros. Clearly this greatly helps the K plan pass testing and the parent HCE's are not negatively affected since they can sock their 15,500 into the 403(b) plan. Can anyone see a problem with this arrangement? I haven't been able to uncover anything that suggests a violation but it almost seems too good to be true.

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Only problem I see is the universal availability rule. See Treas Reg sec 1.403(b)-5(a)(4) for employer aggregation rules and -(5)(b) for the universal availability rule.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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