To meet coverage and non-discrimination, must all provisions be the same?

[Peter Gulia]

A section 414 employer group includes two corporations at different locations with difference workforces. Corporation A includes the business owner and one other highly-compensated employee, and has a few non-highly-compensated employees. Corporation B has a larger workforce, and has only non-highly-compensated employees.

A has a 401(k) plan that provides a matching contribution of 100% on elective deferrals of the first 3% of compensation and 50% on elective deferrals of the next 2% of compensation. A intends this as a safe-harbor plan.

B has no retirement plan. IRC section 410(b)(6)© relief concerning the owner's acquisition of B expires with 2016.

The owner is considering creating a retirement plan for B's employees that would "mirror" A's matching formula, allow entry on the same age and service conditions as for A's employees, and provide 100% vesting on the matching contribution.

But which other plan provisions must be aligned to meet non-discrimination rules?

And which plan provisions may differ without tax-disqualifying either plan?

Both plans will exclude employer securities and provide participant-directed investment. Both will limit investment alternatives to shares of SEC-registered "mutual" funds. Both will provide daily valuation and daily direction. But does it matter that A's and B's designated investment alternatives differ? If so, what kinds of differences are permitted or precluded?

Am I right in presuming that if A's plan allows a hardship distribution, B's plan must?

If A's plan allows a participant loan, must B's plan allow it equally?

[BG5150]

Vesting schedules, if different, would be subject to BRF, I think.

[Peter Gulia]

Vesting will be identical, and 100%, for both A and B.

But can there be differences concerning hardship distributions and participant loans?

[ESOP Guy]

It has always been my understanding that both hardship and loan availability is a benefit, right or feature that has to be offered on a nondiscriminatory basis.

So it has to be in both or you would have to test to prove it passes nondiscrimination. The latter isn't practical in my mind so you pretty much are left with the former.

[Peter Gulia]

ESOP Guy, thank you for the help.

What about the menus for participant-directed investment: is it okay that B's menu of funds is not the same as A's menu?