Redesigning plans - sharing thoughts

[Jakyasar]

To the gurus out there, what do you think for the following:

CB/DC combo, husband and wife, each owning their own companies with children under age 21.

Currently wife takes salary under husband's company thus keeping controlled group. There is no ASG issues as they do totally different stuff.

Husband makes very high salary but wife's income is low. They both defer maximums.

Husband hires an employee who does not want to defer. Plan fails 410b miserably unless the employee gets a high % of contribution which is not quite cost effective. Another option is to reduce the wife's deferral by 40%+.  

Here is a thought I have for 2027 as 2026 is late (the options will be discussed with the client)

1. Stop paying the wife from husband's company i.e. break up the controlled group for 2027. So she becomes a terminated participant in both plans as of 1/1/2027.
2. The wife already has a benefit in the CB plan and also a balance in the DC plan. May decide to leave the monies in the accounts.
3. Wife starts a new CB and 401k plan separately under her own company effective 1/1/2027.
4. As this is a separate company with no ASG and CG issues effective 1/1/2027, the wife's new CB plan will have no benefit offset from prior CB plan as it was sponsored by husband's company as she was a participating employer - I am not sure this is true as her company was funding her portion under the husband plan.
5. Yes, there will new plan costs but this way she can maximize her deferrals and also keep everything separate, subject to their approval.
6. They can reduce the contributions to the employee and still maintain maximum deferrals.

Am I thinking straight on this?

 

[CuseFan]

As part of the control group you say the wife's company was a participating employer in the plans. Terminating her employment in husband's business may end the control group but then you have multiple employer plans unless you also end her company's participation in the plans. I think she has an aggregated 415 limit in any new CBP but on that I'm unsure, you'll need to check which and how attribution rules apply to 415 control group. 

I agree with your thought process, just need to close the loop entirely on her business's participation in the plans and verify the new CBP 415 concerns.

[Jakyasar]

Wife would definitely sever the joinder agreement to avoid multiple employer issues and that is why she was getting a salary to keep the CG alive since there is no more kids attribution for ages under 21.

Still not clear about the combined 415 limit when she starts her own DB plan especially when her company, under CG, was funding the DB portion.

I think 415 combined limit applies here as her benefits were not provided/funded by husband company. Her benefits are still under her own company.

Never encountered this before but logic dictates the combined limit but not sure.