Participate in more than one 401(k) plan?

[Guest klc]

Can a participant participate in more than one 401(k) plan that is sponsored by different companies?

[LCARUSI]

Assuming they are unrelated companies...

Yes, the employee can participate in multiple plans and each company will monitor 415 limits separately based on the employee's compensation at each company.

However, it is the employee's responsibility to monitor the $10,000 to make sure he or she does not exceed it on a combined plan basis.

[MWeddell]

In addition, if the two companies share enough common ownership to be considered as members in the same controlled group, then enforcing the $10,000 limit for both plans combined becomes a qualification issue and highly compensated employees' deferrals to both plans count toward each plans testing, which can really hurt ADP tests.

[LCARUSI]

Following up on Mike Weddell's comment-

If you have a controlled group, you would then calculate 415 limits on an aggregate basis - so the participant can't receive $30K in each plan.

I'm not sure about 401(a)(17) limits. Thoughts on how that works from anyone?

[MWeddell]

The 401(a)(17) limit on compensation (currently $160,000) is a plan-by-plan limit, so the highly compensated employee may be credited with up to $160,000 of compensation for each plan. The fact that deferrals to both plans count in each plan's ADP test prevents any really advantage here.

You're right about the 415 issue: the highly compensated employee is limited to the lesser of 25% of pay or $30,000. The threshold for determining whether there's a controlled group is lowered from 80% to more than 50% just for the 415 test.