Joinder Agreement

[Basically]

I have a client who owns 2 businesses.  Each single member businesses (one is an insurance company, the other investments).  He wants to use income from both businesses to enable himself to max out contributions.  I prepared a joinder agreement so both businesses can utilize one plan.  Correct so far?

If he makes a 10% contribution to the plan from Company A does it stand to reason he must make a 10% contribution from Company B?

Let's say he does, do these contributions need to be in separate accounts? or at least accounted for separately?

Thanks

[Lou S.]

I'm not an attorney so I don't usually see them called Joinder Agreements, we typically see Participating Employer Agreements (or similar) but maybe they are the same and we're just using them interchangeably. In this context it sounds like you have a controlled group with two participating employers of the same plan. Not really an issue at all, happens quite often. One plan, one account, one set of limits, doesn't matter which takes the deduction.

[Paul I]

If you want to be sure about what must be done, read the plan document including any associated basic plan document and the terms of the joinder agreement.  Assuming the plan has a pre-approved plan document, it very likely has built in a lot of flexibility about how contributions are calculated for each business and possibly how the deduction may be apportioned among related employers.  For example, the plan may allow, may not allow, or may allow a choice on considering in the contribution calculation for one company any compensation earned from another related employer. 

In situations where each business type differs (C-corp, S-corp, LLC, LLP, Sole Proprietor...), the decision about the amount of the deduction can be used by each company may have an impact on net taxes.

The plan document will say what must be done, and everything else becomes a matter of how much time and effort will be spent analyzing all other available options.