Combined (DB & DC) plan limits for 1999

[Guest DavidB]

For calendar 1999, I have Company A and Company B. Owner X owns 75% of Company A and 100% of Company B. Owner Y owns 25% of Company A. Company A has a cross-tested PS plan since '94. Company B is establishing a DB plan effective 1/1/99. Owner X was a participant in the PS plan until he excluded himself effective 1/1/99. Owner X is the only employee and participant in Company B's DB plan. I understand that this isn't a controlled group for discrimination testing, but am not so sure about 415 and 404 limits. For 415 I understand that 50% ownership in each company would require aggregation of 415 limits of both plans. Is this true??? And would the 404 limit be the greater of 25% of elig comp or 412 DB contr??? or are plans not aggregated for 404??

Thanks.

[Guest Alan Berger]

I disagree with the conclusion that Companies A and B are not a controlled group. Owner X is five or fewer individuals who own, in common, more than 50% of both companies. This means that the X tested plan and DB will have to consider the employees of both companies for most code purposes. The DB plan probably does not satisfy 401(a)(26). If this was not a controlled group the employers would be considered distinct for 404 and 415 purposes. For example, i am accruing a separate pension benefit at my night job at MacDonalds.

Sincerely

Alan S. Berger

[Guest mo]

I do not think they are a controlled group because the "controlling interest" (80%) test is not satisfied. Pursuant to U.S. v. Vogel Fertilizer, only entities with ownership in both entities are considered for the controlling interest test.

Also, davidb, if you are referring to 415(h), note that this reduction of the 80% to 50% only applies to parent-subsidiary situations and not to brother-sister groups.

[Guest Alan Berger]

davidb

Sorry about my mistake. I've been exposed to this issue a thousand times. This is the first time I responded to a message. Teach me to respond before my first cup of coffee in the morning. Reg 1.414©-2 Example 4 is crystal clear on the issue. After 10 cups of coffee still think you are o.k. on 404 and 415 issues (different employers).

Alan

[Guest DavidB]

Thanks for the help.