Multiple Business Owner Plan Participation

[coleboy]

We are currently doing the administration on this plan. The company is owned by 2 people split 70/30. The 70% owner did not partake in this plan for 2018. He does want to start taking a salary and participate for 2019 to be able to be part of the profit share contribution.

This same owner has 50% ownership in 3 other companies who also have 401k plans. He contributes to one of those plans and participates in the profit share of the other 2 plans.

My question is whether he can be eligible to get a portion of the profit share within the plan that we are administering if he's getting a portion of a profit share in the other companies of which he is a 50% owner?

Of course, we cannot forget his 401k contribution in one of those companies.

Thank you for any insight anyone can give.

[shERPA]

Have to determine if this company and the other companies comprise either a controlled group or affiliated service group.  Then apply the 415 limit appropriately based on the result of this determination. 

[CuseFan]

Also, there could be a 415 control group if he owns more than 50%, even if not a control group for coverage and nondiscrimination (and don't forget affiliated service group possibility if service firms).

So make sure that 50% is 50% and not 50.01%. And double check those rules, sometimes you see "considered owning" and you need to also consider options as well.

[Luke Bailey]

Of course, the 402(g) limit is based in the individual taxpayer, not the employer, so in all cases an individual has only one of those. Also, bear in mind that the controlled group %-age drops from 80 to 50 for 415, but only in parent-sub controlled groups, not brother-sister. Beyond that, these situations are so complicated you really have to do an org chart, figure out the relationships, if any, of individuals, and other details. Your situation sounds pretty simple, but who knows when you actually dig in.