Multiple Employer Plan & Top heavy test

[Guest Amy Marie]

Multiple employer plan for 3 employers: Companies X, Y and Z. Participant A works for both Company X and Y. X and Y are not a controlled group. Participant A contributes from pay of both companies. Top heavy test is run for each company. Participant A will need to be included in each TH test. Do you have to do separate accounting for the participant to determine the account balance used in each TH test? How is this handled?

[John Feldt ERPA CPC QPA]

Do you have to do separate accounting for the participant to determine the account balance used in each TH test?

Yes.

How is this handled?

Each employer is considered as having their own plan for top heavy determination purposes. You run 3 top heavy tests, one for each employer. The allocations made using compensation from company X is allocated to the "plan" for company X, the allocations made using compensation from company Y is allocated to the "plan" for company Y, etc. You have all of the account balances and prior distributions for company X to use for its top heavy determination, Y for its determination, etc.

If any employee happens to work for both X and Y, you can ignore the contributions made to company Y when doing the top heavy calculation for company X. Likewise, you can ignore the contributions made to company X when doing the top heavy calculation for company Y.

[Guest Platinum401k]

Remember also that the "entry date" for both employers will almost certainly be the same date. The Plan Entry date for service, vesting, etc. extends to all adopters under a single MEP. If the employee worked for Company X for three years then picked up a part-time job with Company Y, their original plan entry date for Company Y would be the Company X entry date.

This is just one of the many unique peculiarities of the MEP format...