Control Group and Testing

[Nic Pospiech]

I am fairly inexperienced when it comes to Control Groups.  I have a company (A) who has been bought by a bigger company (B).

The bigger company is Belgium owned company who has two subsidiaries here in Michigan.  

Company A currently offers a Safe Harbor Non Elective 3% contribution as well as an additional match of  up to 4% of compensation dependant on the employees contribution rate.  They have 10 Employees.

Company B currently offers a Safe Harbor Non Elective 3% contribution with no additional ER contributions.  They have 80 Employees.

I am under the understanding that I will need to test these plans together.  

1. Are the plans allowed to offer different ER contributions or do they need to be the same.

2. Will these plans pass testing when combined?  I am assuming as long as 70% of the employees are covered the answer is yes.

What am I missing?

Thank you!

nic

[ETA Consulting LLC]

You will 'eventually', if not 'immediately', have to test these plans together.  Seeing is how they entered Controlled Group status, you must determine what transition relief applies.  This is typically through the end of the year after the year they become members of the controlled group.

Everything beyond that is basic 410(b) and 401(a)(4) testing.

Good Luck!

[Luke Bailey]

Transition rule referred to by ETA Consulting LLC is in IRC sec. 410(b)(6)(C). Read it and understand how it applies to your situation before you do anything else.

[jeanh]

On 8/30/2018 at 8:43 AM, Nic Pospiech said:

I am fairly inexperienced when it comes to Control Groups.  I have a company (A) who has been bought by a bigger company (B).

The bigger company is Belgium owned company who has two subsidiaries here in Michigan.  

Company A currently offers a Safe Harbor Non Elective 3% contribution as well as an additional match of  up to 4% of compensation dependant on the employees contribution rate.  They have 10 Employees.

Company B currently offers a Safe Harbor Non Elective 3% contribution with no additional ER contributions.  They have 80 Employees.

I am under the understanding that I will need to test these plans together.  

1. Are the plans allowed to offer different ER contributions or do they need to be the same.

2. Will these plans pass testing when combined?  I am assuming as long as 70% of the employees are covered the answer is yes.

What am I missing?

Thank you!

nic

Same question- can they have different employer contribution formulas?

 

[jeanh]

I have the same question, can they have have different employer contribution formulas?

 

[Luke Bailey]

Generally, if they pass coverage (410(b)) alone, they can have different formulas. And during the transition period, they are treated as passing coverage alone, even if otherwise would not. Beyond that, it gets really complicated and fact-specific.