Three Partners, one wants a 401(k) Plan

[pjbaer]

We have a client that has an LLC where the employees are paid and each of the three partners have their own s-corp.  The LLC and two partner's have a simple plan.  The other partner wants to have his own 401(k) plan.  Each partner is a 33% owner of the LLC.  Can the one partner have his own 401(k) plan? 

[John Feldt ERPA CPC QPA]

A SIMPLE has an exclusive plan requirement under Treasury Regulation1.401(k)-4(c):

(1)General rule. The SIMPLE 401(k) plan must be the exclusive plan for each SIMPLE 401(k) planparticipant for the plan year. This requirement is satisfied if there are no contributions made, or benefits accrued, for services during the plan year on behalf of any SIMPLE 401(k) planparticipant under any other qualified plan maintained by the employer. Other qualified plan for purposes of this section means any plan, contract, pension, or trust described in section 219(g)(5)(A) or (B).

The entities you describe almost certainly are one affiliated service group and are therefore treated as one single employer, and if they have a SIMPLE anywhere, everyone must be eligible and no other plan can be in place.

If another plan is established by an employer in the group, it invalidates the SIMPLE contributions made for that year.

[pjbaer]

Thanks, this was my thoughts as well.  It has been debated around the office on what is correct.