Can a member of controlled group split from it's plan?

[Lori H]

a 3 member controlled group operates under a 401(k) plan that provides uniform benefits and provisions to all 3. One member brought up the suggestion of having their own plan due to the fact they had a Standard Industrial Classification (SIC) code. I have never heard this.

[Lou S.]

The company could have it's own plan provided it passes all IRS discrimination testes based on all employees of the controlled group.

If it is large enough I might meet the QSLOB rules.

I've never heard anything about having their own SIC code having any real meaning with respect to Qualified Plans.

[QDROphile]

SIC is relevant to a QSLOB analysis.

[Lori H]

Would the benefits, rights and features of the SIC plan have to mirror that of the other members of the controlled group? If it satisfied QSLOB(more than 50 employees, 5310-A, etc) could it have for example a different matching formula?

[Lori H]

????

[austin3515]

If they QSLOB's, yes they can do whatever they want. Mind you, must meet the nondiscriminatory classification test, but then it wouldn't be a QSLOB if you couldn't meet that.

Even if not a QSLOB each plan can still do whatever it wants provided they meet all of the coverage requirements. So if the SH plan disproportionately benefits HCE's it probably would not work.

[Lori H]

Thanks for the response. It's a 3 member controlled group. Right now its only employee deferrals, but one member, which consists of more HCE's, is thinking of doing something on its own.

[austin3515]

btw, one of the qslob requirements I believe is that each LOB must have 50 participants.

[Lori H]

they currently have just under 200 participants, would an audit still be required if one member had their own plan?

[austin3515]

There is no plan aggregation for the audit requirement. 3 plans with 60 participants each = no audit requirement for any of the plans. You still need to make sure each LOB has 50, btw.