Corporate Partner as a plan sponsor

[B21]

I know an individual partner would not be considered an employer for plan sponsorship purposes. But what about a corporate partner? Can an individual partner establish an S-corp & transfer his partnership interest to the S-corp & then establish a qualified plan?

[Lou S.]

Most likely would be an ASG but you check with an employment attorney to confirm.

[jpod]

The short, simplistic answer to the question is yes: a corporate partner employing the sole shareholder can establish a plan covering that individual which is intended to be qualified under 401(a). As noted, however, you have 414(b), © and (m) issues to consider, and the resulting 410(b) issues, as well as 401(a)(26) if it is a DB plan. In a typical scenario, therefore, it's not likely to fly, but in theory it could.

[B21]

Just to be clear, the corporate shares would attribute to the partnership because the corporation is a partner, therefore resulting in an ownership affiliation?

[jpod]

I am not sure how to answer your question other than to suggest you look at the Section 414 single-employer rules and then consider whether a plan maintained by the corporation could meet the 401(a) qualification requirements. Also, your question pre-supposes that the partnership agreement would permit the partner to assign his partnership interest to a crporation, but that may not be the case.