Multiple Employer Plan / 415 Limits

[austin3515]

Owner A and Owner B both sponsor a 401k plan together for their employees.  There is no common ownership but there is overlap in operations for admin, financial reporting, payroll processing, etc.  As it happens, Owner B is an executive with Owner A (Owner A is a very large operation, and Owner B's is much smaller, so owner B has a very significant role in the operations of Owner A's business.    Owner B makes 401k contributions from the co-sponsored plan of $18,000 with respect to his compensation received from Owner A's company.

Can Owner B set up  a profit sharing plan and get $53,000 of proifit sharing too (testing passes taking into account all of B's employees, and that;s not really the question anyway).  The profit sharing plan is NOT a multiple employer plan - only Owner B's company establishes/maintains the Plan.

HEre is the regulation from 415(a)-1:

e) Rules for plans maintained by more than one employer. Except as provided in §1.415(f)-1(g)(2)(i) (regarding aggregation of multiemployer plans with plans other than multiemployer plans), for purposes of applying the limitations of section 415 with respect to a participant in a plan maintained by more than one employer, benefits and contributions attributable to such participant from all of the employers maintaining the plan must be taken into account. Furthermore, in applying the limitations of section 415 with respect to a participant in such a plan, the total compensation received by the participant from all of the employers maintaining the plan is taken into account under the plan, unless the plan specifies otherwise.

 

[KJohnson]

If owner B is an HCE with Owner A did you rule out a B-Org ASG?

[austin3515]

The significant portion test is not met. These are two unrelated businesses, except that they share some admin functions. But that is incidental to the business as a  whole.

[Kevin C]

18 hours ago, austin3515 said:

Owner A and Owner B both sponsor a 401k plan together for their employees. 

If Company B is a sponsor of the multiple employer plan, I don't see how company B can avoid 415 aggregation under 1.415(f)-1(a)(2) of both of the DC plans it would be sponsoring.  If Company B was not a sponsor of the multiple employer plan, then I think you can get a different answer.

 

 

[KJohnson]

Derrin Watson appears to agree with Kevin C.  See Example 18.10.4 in the 6th Edition