Key employee determination

[Guest KRettler]

If a company has a 401k plan and an ESOP the key employees should be the same between the two plans. What happens if the two plan documents have different definitions of the 415 compensation utilized for determining who is a key employee? The different definitions causes an employee to be a key based on the 415 compensation determination in the 401k plan and not a key based on the 415 compensation determination in the ESOP.

[ETA Consulting LLC]

If a company has a 401k plan and an ESOP the key employees should be the same between the two plans. What happens if the two plan documents have different definitions of the 415 compensation utilized for determining who is a key employee? The different definitions causes an employee to be a key based on the 415 compensation determination in the 401k plan and not a key based on the 415 compensation determination in the ESOP.

He's still a key employee with balances in more than one plan. As soon as he meets the definition of Key Employee, then any balance he has in any plan should be counted as key; that's how I'd do it.

Good Luck!

[Mike Preston]

I'm not aware of any requirement that both plans treat 415 compensation the same. If both plans have LOD's why not just follow the terms of the plans?

If you feel that they must be the same for some reason, then amend one of them retroactively and submit the plans under EPCRS to clean up the fallout.