Small business retirement plan options

[Jeannine]

Hello a husband and wife own two businesses, each are 50% of each company.  1 company sponsors a solok - no employees under that company other than them.  The other company wants to set up a retirement plan for (2) employees, one is a W-2, the other a 1099.  Can they open a Simple IRA or what options do they have?  Do husband and wife opt out of this plan or can they also contribute?  Can 1099 employee be included or they need to set up a SEP IRA?

Their goal is low administration on the plan for the employees, so not a regular 401k.

 

Thanks!

[CuseFan]

First, you have a control group, so if the employee of company 2 is non-excludable then you have a coverage (and nondiscrimination) failure in company 1 plan. 1099 person is a contractor, not an employee, and cannot participate unless (s)he adopts the plan as a participating employer - which creates a multiple employer plan. I do not think a SIMPLE works, I'm not entirely sure because I do not work with them but would be surprised if the rule prohibiting any other plans did not apply to the control group.

If they want dirt cheap admin for employee then maybe a SEP, but that would also be a control group plan that applied to owners and keeping 401k just for them does not work. They can't give the owners a Cadillac and provide a Yugo to their employee. They can skimp on admin cost across the board and get simplistic same level benefits across the board, or they can adopt a program that skews as much to the owners as legally possible for a reasonable employee and administrative cost.

[Bri]

The problem with a SIMPLE is that it has to be the sole plan for the year by the employer, and since "employer" refers to the controlled group, they've already got one.