Separate Plans for HCEs & NHCEs

[Guest benefitsguy12]

This seems like a very basic question, but I haven't been able to find a clear answer anywhere. Is it possible for a single employer to maintain two separate 401k plans, one each for HCEs and NHCEs. Obviously, they would want to do this to get around the discrimination/coverage testing requirements. From what I have gathered, the control group/aggregation rules would make this kind of pointless, as the coverage and discrimination tests would be calculated as to all of the employer's eligible employees in both plans. Therefore, for purposes of testing, both plans would be aggregated. Is that correct? Thanks.

[Saiai]

Agreed. I believe the only way around it is to establish QSLOBs which, given your description, it sounds doubtful that these two groups constitute legitimate separate lines of business.

[Jim Chad]

I once saw this done so that the Summary Annual Report, showing a huge amount of money for the owner, is not distributed to everyone.

[BG5150]

Jim, how do you get around coverage on that one?

[chc93]

Aggregate the 2 plans for all compliance testing... (Plan A - owner only, Plan B - staff only) Plan A SAR goes to only the owner. We actually have a couple of cases like this.

[david rigby]

If designing such an arrangement, don't forget to deal with the possibility of an NHCE becoming an HCE.