single employer vs multi-employer plan????

[Guest todd]

A company has a joint venture subsidiary which the company owns 50.1%. Participants from the parent and sub particpant in the 401k plan. The parent controls all activity. The match is paid from earnings. The parent and joint partner do not contribute funds into the plan. The plan functions as a single employer plan. However I am not sure if it meets all the IRS regulations. According to Regs 1.414, even though the company does not own 80% (<50% o.k. for common control purposes) it appears that common control is established and it is a single employer plan. Is this correct???

[QDROphile]

MultiPLE employer plan. I don't understand the statement "<50% o.k. for common control." The rules under 414(p) determine common control. The basic standard is 80%, subject to brother/sister entity situations and subject to determining what to measure against the 80% standard when you can't simply count shares of a corporation. You have not suggested that any measure gets the ownership or control to 80% or that the 50.1% owner has any relationship with the 49.9% owner.

[Kirk Maldonado]

Have you considered whether you have an affiliated service group?

[alanm]

A multi employer plan is a collective bargain plan. A multiple employer plan is different than that and your situation would probably qualify. A mulitple employer plan requires each entity be separately tested so it won't help you. However, it would be advisable to run two separate stand alone plans because you do not have the 80% ownership to put both companies into one plan. The 50% common control test is only part of the control group test. You must also pass the 80% test and you don't unless you are an affiliated service group.

There is also a 50% control test to see if the 415 limit must be aggregated per participant even though you don't pass the 80% control group test.

[Guest Jordan]

Assuming there is no affiliated service group, I agree that you likely have a multiple employer plan. This is a fairly common situation, particularly with joint ventures. Multiple employer 401(k) plans can be maintained as single plan/single trust arrangments. Reg §1.410(B)-7©(4)(ii)© requires each controlled group within the plan to test for ADP/ACP compliance separately based on its group's compensation, deferrals, match, etc. Minimum coverage (410(B) is also tested on a controlled group only basis. Many recordkeepers can code employees as belonging to one grou or another for testing purposes. The new Form 5500 allows the plan to file a single 5500 with a separate Schedule T for each controlled group in the plan. Hoep this helps. Jordan

[david shipp]

>>>>The match is paid from earnings. The parent and joint partner do not contribute funds into the plan. <<<<

Does any one else question this?