Classification Group for one HCE?

[Lynn Campbell]

Law firm with 2 partners wants to set up a cross tested plan with 1 classification group for each partner, so that one partner can get a larger contribution (incomes are equal) with all other EEs in the 3rd classification group. Partners are the only HCEs. Would this work or are we in a problem area where the IRS might say this is a 401(k) Plan?

[kboyce]

You can identify each attorney by specific attribute. For example, attorneys born on or after 19XX & attorneys born before 19XX. You can also set up a stand-alone plans for one or both partners. This/these plans can even be a Money Purchase if contributions for NHCE's are sufficient and Money purchase plan can alleviate Sec 404 deduction limit issues. Core plan can exclude one or both partners by name. All plans are tested for average benefit & rate segment testing as a single plan. If one partner is left in core plan, then any contribution within 401(a)(4) & 404 limits is an option. This approach has been used since 1-1-97 with subsequent IRS approval on document language & structure.

[This message has been edited by kboyce (edited 11-25-98).]