Two Plans Within A Controlled Group

[mming]

A husband owns company X and his wife owns company Y. They are a contolled group, as Y manages X. Although it was explained to them that they would only need one plan to cover all employees in both companies, they insist on having a plan for each company and not covering the other company's employees, preferring a new comparability 401k/PS plan with every provision identical. X has many NHCEs while Y only has the owner and will never have NHCEs.

I'm thinking that the maximum PS contribution (and perhaps the deferrals and match) to plan Y would be determined by including all participants from both plans in one general test with the wife being considered an HCE. Is there a way for each plan to be tested separately so that larger contributions can be made to plan Y?

X and Y are leaning towards having both plans use a matching contribution safe-harbor design, which I understand will have to be tested for meeting the top heavy requirements if a PS contribution is made (presumably with both plans once again tested together). For good measure, X and Y have different FYEs, but I assume having different PYEs won't make things worse if the plans are tested in a consistenct manner every year. Are there any other complications that may arise out of this type of arrangement? Thanks in advance.

[Laura Harrington]

A husband owns company X and his wife owns company Y. They are a contolled group, as Y manages X. Although it was explained to them that they would only need one plan to cover all employees in both companies, they insist on having a plan for each company and not covering the other company's employees, preferring a new comparability 401k/PS plan with every provision identical. X has many NHCEs while Y only has the owner and will never have NHCEs.

I'm thinking that the maximum PS contribution (and perhaps the deferrals and match) to plan Y would be determined by including all participants from both plans in one general test with the wife being considered an HCE. Is there a way for each plan to be tested separately so that larger contributions can be made to plan Y?

X and Y are leaning towards having both plans use a matching contribution safe-harbor design, which I understand will have to be tested for meeting the top heavy requirements if a PS contribution is made (presumably with both plans once again tested together). For good measure, X and Y have different FYEs, but I assume having different PYEs won't make things worse if the plans are tested in a consistenct manner every year. Are there any other complications that may arise out of this type of arrangement? Thanks in advance.

For starters, if you want to aggregate the plans for coverage and nondiscrimination testing, they will need to have the same plan year end.