multiple employer plans and design options

[t.haley]

I have a client that would like to establish a multiple employer plan as follows. My client leases staff to professional corporations and pays the leased staff via a W-2; they enter into a leasing agreement with the recipient corporation. As a marketing tool (in addition to providing staff and payroll), my client would like to offer a retirement plan service in which there is a "base" safe harbor plan document that may be adopted by the employer; however, the employer also has the flexibility to change the contribution from a safe harbor to something else suited to them. my job is to determine whether this is allowed under the IRC and ERISA. I have been unable to find anything directly on point. Any suggestions or insight would be greatly appreciated!!!!

[QDROphile]

You cannot have a 401(k) plan that is a multiple employer without violating secuities law.

[J Simmons]

Since each employer participating in a multiple employer plan (MEP) must have its piece of the plan tested separately for nondiscrimination and minimum coverage, and the safe harbor is against testing, it would seem logical that the safe harbor could be applied on an employer-by-employer basis rather than all or nothing, plan-wide. Following this logic, the employer that chooses to go outside the safe harbor would need to have be tested and corrective measures taken to assure it passes. The MEP document should give the Plan Administrator the authority to test and take the remedial steps necessary to assure that the MEP is not disqualified due to one employer's piece of the MEP failing testing.

[Guest Sieve]

Hold on a minute! What's this about a multiple-employer 401(k) having to meet securities laws. Why? Where does that come from? Never heard of it. Where have I been all my life?

Now, I think the safe harbor plan t.haley is talking about is not a 401(k) safe habror, but is the leased employee safe harbor (10% MPPP, fully vested, immediate eligibility - IRC Section 414(n)(5)). It would just entail a mini-adoption agreement for each employer participating in the MEP so that the vesting, contribution, and entry (among other things) could be individually selected by the adopting employer. It would not have to meet the requirements of such a safe harbor plan for any individual adopting employer. The 20% NHCE workforce issue is the one that generally puts employers beyond the reach of a potential 414(n) safe harbor plan. But, I don't think there's anything wrong with the approach posed in the OP.

But I'm still puzzled about the securities issue . . .

[WDIK]

Sieve:

That's three of QDROphile's main themes in one day that you've had the privilege to encounter. You may just consider reading all of his prior posts.

[Guest Sieve]

Hey, WDIK -- Lucky me, ehh!?!? Is 3-in-a-day the good news or the bad news? I can't even count to 2,000 let alone read 2,000 posts. As the new kid on the block, I'm still learning the characters in this drama (& we are all characters). But I've now gone back and read some of the securities/MEP 401(k) posts, and clearly have some self-educating to do. Although an MEP securities issue has never crossed my desk, QDROphile's statement (gratuitous?) certainly took me by surprise.

[QDROphile]

If you have not already done so, you might check the thread on the securites law board that started on April 28, 2005. It provides a roadmap, some key citations, and a bit of amusement if you are interested in personalities. If it makes you feel any better, I do not have a post on that thread.

Please explain your one word question in parentheses. The post is asking about pitfalls. I pointed out a pitfall that would not commonly be anticipated in the retirement plans community.

[Guest Sieve]

I did read the thread you mention, although it's not so easy to locate because, of course, they are sorted by date of last post. And I even went there without knowing whether or not you had a post -- talk about taking a chance!!

Give me a break, Q-phile!! I included a question mark, didn't I? Actually, I read the OP narrowly--it asked whether different employers could adopt different provisions in a multiple employer plan--and I figured that was the direction the posts would go. So, I didn't expect to see such an unrelated post--at least not right out of the gate. I'm not suggesting that your post wasn't helpful to t.haley--or to me--just unrelated to the question. Nice doggy -- down . . .

[QDROphile]

I see. You did not mean "gratuitous?", you meant "with gratitude."

[Guest Sieve]

No. I meant "gratuitous?"--which is different from "gratuitous!" . . .

But, yes, thanks.