Multiple Employer Plan - Safe Harbor Design

[Guest SWadd]

I have a multiple employer plan that has adopted a 3% safe harbor nonelective design. The plan has 16 adopting employers of which five discontinued their safe harbor contribuiton for the 2009 plan year. My question is - since See Treas. Reg. §1.401(a)-30(a) allows for each adoptiong employer to be treated as a separate plan, am I OK to just perform ADP testing on the five plans in question? I was not sure if this would create a document issue - the VS does have "wait and see" language.

Any thoughts on this issue would be very much appreciated. Thanks.

[QDROphile]

Not the issue you requested, but at some point be sure to notify the plan that you are not responsible for advising the plan about securities law compliance. If you have no idea why this suggestion, all the more reason to make clear the limitation on the scope of your engagement. There are securtities law issues with multiple employer 401(k) plans. You are probably protected if your engagement agreement specifically identifies what you do and excludes everything else relating to plan design and administration.

[rcline46]

Be very sure the document/participantion agreements give each employer the 'maybe' safe harbor option. If not done correctly, the PLAN has the control and therefore the main sponsor has the control.

Assuming each employer has the control, then you should be ok. Otherwise you have a failure to follow the document and now have big problems. The regulations may give you flexibility, but that flexibility must be incorporated into the document.

[John Feldt ERPA CPC QPA]

'The VS does have "wait and see" language.'

Does this mean the document says that no testing is needed for an employer's plan if they gave a maybe notice and then adopted SH for the year? and that testing is needed for those employers' plans that gave a maybe notice but did not adopt SH for the year? If that's the case your document seems to be okay. If not, you may have adocument failure and that will need to be fixed, because there's no getting out of the need for testing on an employer-by-employer basis.

Since you have a plan with unrelated multiple employers, then each Employer's plan is tested without regard to the other unrelated employers' plans for coverage, nondiscrimination, and top heavy.

Thus, an employer with safe harbor still needs to pass coverage, and depending on the design, may need to test for top heavy (you'll need info on any other qualified plans of that employer to do the TH test).

If an employer in the MEP is part of a controlled group but their plan in the MEP does not cover all employers of their controlled group (or suppose it only covers employees of one of their locations), then you need additional census data to do coverage testing.

The plans that have adopted safe harbor designs would pass their nondiscrimination by virtue of being safe harbor.

For the 5 employers that are not safe harbor, you'll need to do 5 ADP tests (and an ACP test for each of them that provided a match).