Can a 414(k) plan be a profit-sharing plan?

[Carol V. Calhoun]

Code section 414(k) provides for a combination DB/DC plan. However, I'm trying to figure out whether the DC portion can allow for discretionary contributions.

What we're basically trying to do here is to have the contributions to the DC portion go up or down depending on what contributions to the DB portion are required. While I may be able to figure out a formula under which that would happen that does not involve employer discretion, it would be a lot easier just to allow for discretionary contributions. However, while 414(k) talks about a combined DB/DC plan, it does not explicitly provide for a combined pension/profit-sharing plan. (A combined DB/DC could be a DB/money purchase plan, which would still be entirely a pension plan.)

For technical reasons, we don't want to have two separate plans. However, it seems to me that if the structure would be allowed in the case of separate plans, it doesn't make much sense to disallow it if the plans are combined.

However, I'm particularly concerned because 414(x), which provides for combined DB/401(k) plans, is limited to small employers. I'm wondering whether the negative implication is that other employers can't have combined DB/profit-sharing plans.

Has anyone seen any guidance, or had any experience, with this?

[Mike Preston]

I'm not aware of any prohibition as to the creation of a combined DB/DC where the DC constitutes a 414(k) with discretionary contributions. However, I'm not aware of any pre-approved plans that allow same. Accordingly, it would at the least require an individually designed plan. I can't imagine the work required to draft such a plan being efficient when compared to drafting and administering a DB (whether pre-approved or not) along with a separate DC (whether pre-approved or not).