SIMPLE IRA Exceptions – can more than one plan be offered?

[Francis]

Does anyone know of any circumstances under which an employer can offer a SIMPLE-IRA to one class of employees and a 401(k) profit sharing plan to a second class of employees? This is a single employer with one tax ID number.

[Borsley]

I'm not sure how helpful my response will be, but here are my thoughts.

I believe the answer may revolve around whether or not excluding one group from one of the plans allows said plan to still pass 410(b) Coverage testing. Plan sponsors are allowed to exclude covering certain groups of employees from their qualified retirement plans as long as they can still pass Coverage Testing. That said, there are some exclusions that are not generally allowed (e.g.…excluding an employee class that is identified as "part-time employees").

There may be an additional consideration since the excluded class of employees will still benefit from another type of plan. Average Benefit's Test? I may be wrong on the test name, but I seem to recall from my days working with qualified plans that there was a test to determine if employees were being properly covered given different benefits offered to them.

Bottom-line: I would say there is a possibility this is allowed, but you're going to need to work with an experienced benefit's attorney or consultant to determine the possibilities of going this route.

[Gary Lesser]

A SEP for non-collectively bargained employees (whose retirement benefis were negotiated) may be used in combination with a 401(k) that only covers collectively bargined employees. If any employee is covered by both plans, all SIMPLE-IRA contributions are excess contributiuons. IRC 4089p)(2)(D)(i)

Hope this helps