Separate plans for each of the owners?

[austin3515]

Why woluld you have a separate plan for each owner? We're taking over a plan from someone we know is "legendary" so we know there is probably a very good reason!

[QDROphile]

More fee revenue?

[austin3515]

I believe I've been down this road before and heard there was actually some basis in compliance matters (other than SAR and 5500EZ's).

[Tom Poje]

lets say I have 1 plan (profit sharing only) and 5 owners, each in his own group. The profit sharing contribution is being made, and some owners 'choose' no contribution.

In the eyes of the IRS, you arguably (could?) have a CODA where none such animal exists. Even if it was a 401k then arguably you have people receiving more than the deferral limit.

But for some reason, the IRS won't question this if each person has his own plan.

[Bird]

If it's what I think it is, it has to do with the investments. Are both accounts trustee-directed? It's a way to effectively self-direct for the owners only, in an open-ended manner, without saying so in the plan(s). So you might have 10 rank and file in one plan, trustee-directed, and 2 more plans for the owners. All are identical in terms of provisions, and all are trustee directed, so benefits rights and features are ok.

I'm not saying it's something I'd ever even suggest to my clients, but I'm pretty sure that's what's going on.

[austin3515]

I agree that would be another good reason, but in this scenario, everyone had self directed. And knowing the person involved, he is very very conservative aboutt his kind of thing so I believe it is what Tom was suggesting. Interestingly, I wonder if QDROhile is partially right as well. You say, "hey, the IRS could really come down on you hard, so I recommend having all of these individual plans" so you get more fees and can still sleep soundly at night.

The more I think about it, really isn't that big of a deal to do this. You could have one "plan" on Relius (or whatever), you could even have everyone on a contract at John Hancock. So you really just have to do a few extra 5500-EZ's (since you now do not have to pass coverage in order to use the EZ).

[rcline46]

The SARs distributed to the staff will not contain the assets of the separate owner plans.

[Belgarath]

Bird - if you are combining the plans for coverage testing, then don't you have to combine for nondiscrimination testing? So how would this benefit the owners, since all investment options would be subject to BRF testing?

I'm sure I'm missing something here.

[Peter Gulia]

If a designer seeks to allow different investments for a highly-compensated employee, what about this:

A plan that includes non-highly-compensated employees and some highly-compensated-employees provides participant-directed investment. The separate plan for the differently-investing highly-comjpensated employee does not provide participant-directed investment.

Can this work, or is it too clever? Could the IRS argue that the opportunity not to be burdened by a duty of participant-directed investment is a right or feature not available to the non-highly-compensated employees?

[QNPG]

Bird - if you are combining the plans for coverage testing, then don't you have to combine for nondiscrimination testing? So how would this benefit the owners, since all investment options would be subject to BRF testing?

I'm sure I'm missing something here.

BRF takes into consideration the ratios of NHCEs and HCES. If there are no NHCEs, where is your test? I may be missing the entry about the employees - all I read is about the owner???

[Belgarath]

Bird's post posited 10 rank and file employees.

[QNPG]

Bird's post posited 10 rank and file employees.

AHhhh!! Ok, got it.