Jump to content

MEP - do you ever aggregate members for TH min?


Recommended Posts

I've got this cute little MEP with two adopting employers - it would be a CG except that they are owned by different brothers.  It would be an ASG except it's a construction business so it can't be.  So MEP it is.

In Co1, two brothers have a partnership that always operates at a loss.  In Co2, all four brothers own an S-corp and earn $500K+ each.

They finally have non-union employees who are becoming eligible.  Presuming they listen to me and only pay them from Co1, then top heavy is a non-issue.  No keys have any benefit in Co1's portion of the plan (because they never have positive income there).  And... the fact that these same partners are putting away the max through Co2 is not a problem.

Or is it?  I've got something nagging at me about maybe there IS aggregation here, but I can't find anything in any MEP resource that supports that.  If I'm only imagining it, that would be great. LOL

Link to comment
Share on other sites

No CG, no ASG so no aggregation. I'd be careful simply paying eligible employees solely from Co1 if they are providing services to both companies, especially since unrelated, and assuming they've been on payroll(s) for some time already if becoming eligible. I'd suggest consulting with qualified tax accountant before playing those games.

In a MEP, I think the only aggregation is for service, but I'm sure others out there that deal with these know that for sure and anything else relevant.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

Link to comment
Share on other sites

Without questioning AlbanyConsultant’s or CuseFan’s reasoning:

If Co1 always has a loss and Co2 has enough margin to pay its four executives more than $2 million a year, that suggests some tax-law questions about whether the companies are not separate or whether either lacks accounting that clearly reflects income.

We presume you warn that your advice about whether Co1 and Co2 do or don’t constitute one employer is limited to I.R.C. § 414(b)-(c)-(m)-(n)-(o), and is based on the facts your client presents, with no inquiry about whether tax law would respect those facts.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

Link to comment
Share on other sites

Allow me to rephrase: I tell them that the plan administration is much simpler and more beneficial to the owners if the staff are all paid out of only one entity, but they have to do what is legal and correct on the payroll side.

I'm not qualified to determine if any company is a valid stand-alone entity; if questioned, I defer that to their tax attorney or accountant.  I think that's outside the purview of plan consulting if they are representing to us that their business model is OK.

 

1 hour ago, Belgarath said:

I believe that compensation for 415 limits includes comp from all employers participating in the MEP.

I don't think that would matter here - I've got a W-2 and a zero (or negative) K-1.  I believe that the consensus would be to ignore the K-1, though I think that's not actually in written regulation anywhere.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...