KSOP - Substantial and Recurring Contributions

[EBECatty]

Say you have a KSOP in a privately held company. The stock in the ESOP portion is fully allocated and the employer doesn't anticipate contributions for at least the next several years. The 401(k) portion allows deferrals and also has a discretionary match and discretionary profit-sharing.

I understand the 401(k) side of the plan won't violate the "substantial and recurring" contribution requirements even if the employer makes no PS or matching contributions. Does the same logic extend to the ESOP portion of the plans?

I'm having difficulty pinning down exactly what constitutes "the plan" here. Is it the entire KSOP plan collectively? Does the ESOP portion need to be separated from the 401(k)/PS side of the plan? Any cites (formal or otherwise)?

[ESOP Guy]

While as a practical matter KSOPs tend to be run like two plans they are legally one plan.  So for example when deciding if a person has been fully paid in order to forfeit a person on the ESOP side you have to make sure they were paid on the 4k side and the ESOP side. 

So in my mind this plan has regular contributions if the 4k side is getting the contributions you describe.  I can't point to a cite but I think doesn't exist because it is one plan so any contribution to the plan count.

[QDROphile]

A cautious person would check the plan document to determine if the document provides for one or two plans.  The prevailing practice is to treat the ESOP as part of a profit sharing plan, as allowed by a regulation under IRC section 4975, but that is not required. One clue, assuming matters are handled properly, is the filing of Form 5500.  A single plan will file one. If the document covers two plans, two forms must be filed.