Payroll Deduction IRA and 401(k) Plan under same employer

[Rai401k]

Does anyone know if you can set up payroll deduction IRAs and have a 401(k) plan under the same employer.

We have a client that excludes all highly compensated employees from the 401(k) plan.

Since the 401k is not offered to the HCEs they are looking to offer the payroll deduction IRAs to the HCEs.

Does anyone know if this is permitted, I read on the IRS website that the Payroll Deduction IRAs would have to be offered to all employees of the employer. However they don't want to do this for obvious reasons.

[401king]

Payroll Deduction IRAs would have to be offered to all employees of the employer. However they don't want to do this for obvious reasons.

What would be the obvious reasons? If a non-HCE wants to sign up for the IRA, IRA + 401k, or 401k only, what is the downside to the employer (I'm not familiar enough with the Payroll IRAs to know).

What seems to be a more likely issue is that some of the HCEs would not be eligible for deductible IRA contributions.