A not-for-profit entity sponsors a 401(k) plan but expects to add several for-profit companies to its growing list of businesses

[katieinny]

I'm thinking that as long as the 401(k) plan passes coverage, they can exclude the EEs from the for-profit businesses. But as more and more companies are added, they will no longer pass coverage if they continue to exclude that group of EEs. Are there other plan design options that they could consider? Or will they just have to bite the bullet and include the EEs from the for-profit businesses once they fail the coverage test?

[david rigby]

Separate plans?

BTW, there may be a smell test: Is this using a for-profit entity to provide benefits to the non-profit EEs?

[katieinny]

The issue is employer contributions, of course. The current 401(k) plan does have ER money going into the plan. I suppose they could set up a separate plan(s) for the for-profit businesses that only allows EE deferrals, but does that solve anything? I'm told that the type of businesses they are buying does not traditionally provide retirement benefits, at least not with ER money going into them.

I don't understand your question about the for-profit companies providing benefits to the not-for-profit EEs. My off-the-cuff response is no. For the most part, these will be small companies in various states that will not be involved in the not-for-profit business.