Eligibility and Coverage Test

[emmetttrudy]

An employer has two plans, a 401(k) and DB Plan. The owner pays his two children approx. $5,000 per year however, they have never met the eligibility requirements for either Plan because they never work even close to 1,000 hours. There is one other employee who works about 700 hours per year and is paid approximately $16k.

The owner is the only participant in the 401(k) and DB Plans. Is this ok? Is there a nondiscrim or coverage problem that should be considered? Or because the other employees never meet the eligibility requirements then it is ok for the owner to be the only participant in either Plan?

Thanks for any help.

[Guest Sieve]

Should be no problem as you describe it--except theoretical, perhaps.