controlled group question

[cpc0506]

Company A, Company B and Company C are a controlled group as Company A owns 100% of Company B and Company C.

Client would like to off the following:

1. 401(k) to all employees of companies A, B, C

2. One tier of Match to only all NHCE employees of Company A, another tier of Match to only NHCE employees of Company B and nothing to Company C.

Will this work? We should pass coverage on the match since coverage is automatically satisfied if NO HCEs are allowed to participate. Is my reasoning correct? What am I missing?

Thanks.

[12AX7]

What a very fortunate set of circumstances if HCEs are class excluded from all plans! You will of course need to monitor if NHCEs should graduate to HCE status and prevent their participation in the plan for future years. That may become an awkward situation if participation should cease for the previous NHCE. Otherwise, you should be good to go.

[cpc0506]

What about the two different tiers of match for the NHCEs based on company? Is this a concern?

[david rigby]

Discrimination testing is about comparing HCEs to NHCEs, not about comparing within either of those classes.

(Possible exception: Key employees)

[12AX7]

Kathy, the Plan Document(s) would define the match for each group of participants. If there are no HCEs benefiting in the plan, then rate of match defined for each group is not a discrimination issue.