How to specify the groups - 3 doctors, no employees, they want flexibi

[Earl]

I have a client, group of 3 doctors w/ no employees. They want flexibility to contribute different levels year to year to each of themselves. Cross testing does this in a breeze, but how to designate? All equal prts., all hired same day. Another topic on the board discussing ownership attribution mentioned "naming" the doctors as group members. (A=smith, B=jones) I always thought naming was not allowed. Comments?

[This message has been edited by Earl (edited 11-24-1999).]

[Larry M]

How about class 1 = owners born between 19xx and 19yy; class 2 = owners born between 19ww and 19uu; class 3 = owners born between 19zz and 19aa; class 4 = other employees who have at least 1000 hours, etc.?

[Lorraine Dorsa]

I don't see any problem with defining the classes by name. In fact, I seem to remember it being asked of the IRS at one of the ASPA or other meetings and they said they saw nothing wrong with it. The IRS' main concern appears to be the "definitely determinable" nature of the class definitions (and name is certainly definite).

I have plans in which classes are defined by name, but have been careful to warn my clients that they need to make sure that this does not become an impermissible cash or deferred arrangement (deferals greater than the 402(g) limit and/or deferrals by HCEs only), which it could easily become if each individual doctor chose his own contribution level and such contribution directly reduced his compensation.

I tell my clients that classes can be named by individual, but that the board of directors (or equivalent) must determine and specify in writing the amount to be contributed to each class.

(Yes, I know that the individual doctors sit on the board and that the board also sets the compensation of each doctor, but the directors are acting in their capacity as directors, not as individuals, when making these determinations.)

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