Need Input on Plan Design

[Susan S.]

I am working on setting up a plan for a new client. The only employees are the owner and his son. They want the father to get a greater contribution than the son, so I believe that eliminates SIMPLE and SEP. I have never dealt with a plan with only HCE's. Is cross testing an option with each of them in a separate rate group and a different contribution percentage for each? I assume it would pass testing since there are no NHCE's. Any other suggestions? My only other thought is aged based profit sharing.

[Lou S.]

A qualified plan can always discrimate against HCEs and an employer with no NHCEs pases testing automatically.

No problem at all with cross-tested contribution in this case, seperate groups seems the most flexible.

[John Feldt ERPA CPC QPA]

If the plan only has HCEs, the usual profit sharing or 401(k) document with each participant in their own allocation class should be easy enough. No cross-testing (or any 401a4 testing) needed if the only eligible employees are HCEs. Assumes the plan passes coverage.

[Bill Presson]

Plus the 401(k) deferral will allow a difference in contributions as well. All good comments above.