MBO Partners 401(k) Plan

[401 Chaos]

Anybody familiar with MBO Partners (f/k/a mybizoffice.com) and the 401(k) Plan they offer. Based on their website, they indicate they have created a unique sort of set-up for independent contractors and consultants that they call a portable employer of record (PER). Basically if you are an independent contractor or service provider, it appears you can sign up with MBO and have them bill your client, etc. and they will provide you with a W-2 instead of a 1099 for your receipts. They say that basically they establish a separate division or group under MBO Partners for each consultant then the consultant more or less hires themself through the separate MBO division.

Of particular interest to me is the 401(k) Plan they offer to their consultants and advertise as one of the key advantages to going with their PER model rather than typical indendepent contractor arrangement. They say that their arrangement / plan will permit consultants to defer up to the maximum annual contribution $49,000 each year. Apparently you make elective deferrals on the employee side and because each consultant is also a separate employing group or division under the MBO Executive 401(k) Plan, the division can also make employer matching and profit sharing contributions (presumably determined on a division by division basis).

I'm trying to figure out exactly how their 401(k) plan can permit this and whether that all seems viable. Would welcome thoughts from anybody with experience with this or similar arrangements.

[Bird]

I don't know the specifics of how it works, but it doesn't appear to allow for any higher contributions than you could make as an unincorporated independent consultant. If you're getting a 1099, and it is a legit arrangement, then you can make both employee and employer contributions based on that business income.

[401 Chaos]

Bird,

Many thanks. One of the interesting things with the PER arrangement is that you apparently get a W-2 from MBO rather than a 1099 so they in essence have what they describe as a single employer 401(k) plan with 1,000+ participants who are seemingly treated like employees for 401(k) and tax purposes but each have the ability to select their individual 401(k) contribution amounts. Their website describes them as basically setting up a separate division with it's own P&L, etc. for each individual consultant. It just seems strange to me that you could have one single employer plan that in essence seems to permit all these independent contractors to participate and set their own level of participation, etc.