BG5150 Posted February 9, 2016 Posted February 9, 2016 Company A sponsors plan, with Companies B, C, and D adopting employers as a controlled group. Calendar year plan. 3% Safe Harbor allocation. On Oct. 1, 2015, Company B is sold. One participant leaves Company B and starts working for Company C. She made $75,000 for B and $25,000 for C. The sponsor wants to know if Company C can pick up the entirety of the Safe Harbor for the participant. Or must the cost be proportionately shared between B & C? QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
BG5150 Posted February 12, 2016 Author Posted February 12, 2016 No one? QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Belgarath Posted February 12, 2016 Posted February 12, 2016 Stock sale? Is Company B still part of the controlled group? I'm assuming, based on your question, that the answers are yes. That being the assumption, I'd say that yes, since as co-sponsors of the plan, they are treated as a single employer for purposes of IRC 404. Now, the accountant/controller, whatever, might possibly have some problems with that approach from a corporate accounting viewpoint - that's a separate issue.
Bird Posted February 12, 2016 Posted February 12, 2016 The plan doesn't care, right, as long as it gets the required contribution? And if Companies B and C are both happy to have it as laid out, then they don't care. The IRS doesn't care either; they would just look at compensation and contributions received. Some hyper-technical accountant might say there was a transfer of liabilities from one company to another which might have some balance sheet implications, but the accountants I work with wouldn't care either. So I say go for it. Ed Snyder
BG5150 Posted February 12, 2016 Author Posted February 12, 2016 B is no longer in the CG. My thought was that C would be getting a bigger deduction by contributing funds to the plan based on compensation not paid by the company. And B would be getting no deduction. It's only one person, but still... QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left.
Bird Posted February 12, 2016 Posted February 12, 2016 B is no longer in the CG. My thought was that C would be getting a bigger deduction by contributing funds to the plan based on compensation not paid by the company. And B would be getting no deduction. It's only one person, but still... Understood, but as long as C doesn't exceed a deduction limit, I don't see a problem (because no one cares...). Ed Snyder
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