SAR for plan with only a few participants

[Guest JPIngold]

Has anyone ever found a way to still comply with ERISA and yet make the SAR a little less obvious as to how much is in the trust? I have a few plans where the owner has a million dollars in the plan and the one or two employees have a couple of thousand in the plan due to turnover and the owner hates how obvious the SAR makes it as to how much is in the plan for him.

Thanks.

James

[SheilaD]

Has anyone ever found a way to still comply with ERISA and yet make the SAR a little less obvious as to how much is in the trust? I have a few plans where the owner has a million dollars in the plan and the one or two employees have a couple of thousand in the plan due to turnover and the owner hates how obvious the SAR makes it as to how much is in the plan for him.

Thanks.

James

I've never found a way around it and have had several clients in the position you describe.

[Peter Gulia]

Consider creating two plans: one plan under which the business owner is the only participant, and another plan for other employees. You'd test the plans together for coverage, non-discrimination, top-heavy, and other purposes. Is there any other reason why an employer couldn't maintain more than one retirement plan?

[david rigby]

Is there any other reason why an employer couldn't maintain more than one retirement plan?

Good idea, but you will have 410a26 problems if it is a DB plan.

[Peter Gulia]

(A defined-benefit pension plan's tax-qualified treatment is subject to an IRC 401(a)(26) minimum-participation condition.)

JPIngold, is your client's plan an individual-account plan?

Is it feasible to divide it into two or more plans?

[Guest JPIngold]

(A defined-benefit pension plan's tax-qualified treatment is subject to an IRC 401(a)(26) minimum-participation condition.)

JPIngold, is your client's plan an individual-account plan?

Is it feasible to divide it into two or more plans?

It is a 401(k) plan with self-direction, so your idea would work as we have no (a)(26) issues and no pooled account issues. So, I simply tell the client, "if it is that important to you, we can keep it secret for the cost of another plan document and administration". We just have to keep it a one participant plan so there is no public record of the return/report.

Thanks for the idea.

James

[Peter Gulia]

Thanks for the kind words.

It's also wise to remind the business owner to get his or her lawyer's advice about possible disadvantages of a one-participant plan, including that it might not be ERISA-governed and so might result in less protection against creditors.

If that protection, or some other value from ERISA governance or preemption, is of value to the business owner, he or she might design the second plan so that it includes one trusted employee beyond the owner (and owner's spouse).