Safe Harbor Contribution for Owner in Controlled Group

[MindyFPG]

I have a client whose owner is also 100% owner of another company. Both companies maintain their own plans and both just converted to a safe harbor for 2015. The owner has compensation at both companies but only defers to the plan I do not administer. His compensation at each company is below the limit for 2015 but combined is over the limit. Obviously he does not receive a 3% safe harbor contribution from each employer because that would put him at over 3% of the annual compensation limit. The client is hoping that the plan he defers in can just give him the full 3% of $265,000 since it is a controlled group. I've researched but I can't find anything regarding this situation. Does he need to get something in each plan or is doing it all in one plan permitted? Thanks!

[bito'money]

What do your plan terms say regarding definition of comp? Does it just count pay from the company that sponsors the plan, so that the other company is a non-participating employer in your plan? Also, unless the plan provides that safe harbor contributions can be made to the other plan I can't think of any rationale for contributing the full amount to the other plan.

401(a)(17) says that a plan cannot base allocations on compensation in excess of the compensation limit. If you are not doing that, then it may be ok to take all the owner's pay from your plan's sponsor into account. For example, if he receives $150k in comp from company A and $150k from company B, you could conceivably have him get $4500 in each plan.