What affect does a union plan have on a plan of the employer in which

[John A]

Is a 401(k) plan sponsored by a union aggregated with 1 401(k) plan sponsored by the employer? For example, suppose the the union employees participate in both plans - do the 415 limits apply to the combination of the plans or to the plans separately? How is deductibility affected? Are the plans aggregated or treated separately for other purposes?

[Guest Brian4]

Note that the 402(g) $10,500 annual limit on 401(k) plan deferrals is per individual. This is reported to the IRS on the employee's W-2 Form. Each individual's total deferrals cannot exceed the limit, even if they change jobs and employers during the year.

What employer(s) is the individual's service with? What type of plans are the employees covered by, single employer or multiemployer?

[John A]

The employees are covered by both a single employer plan maintained by the employer and a multiple employer plan maintained by the union.

[Guest Brian4]

I assume this means you are talking about rank and file members only employed by the company. The plans must be aggregated for Section 415 purposes. However, multiemployer plans usually treat service with each employer separately for purposes of the 415 limit. In this situation, only the part of the members benefit from the multiemployer plan due to service with the employer sponsoring the single employer plan would be aggregated for 415 purposes.

[John A]

"rank and file members only employed by the company" as opposed to what?

[Guest Brian4]

As opposed to someone who worked for two different employers. For example, a union member working for the company, but less than a full schedule, who also works on the union staff and is paid by the union.

[John A]

How would an employee in the situation you just described be treated?

[Guest Brian4]

Thinking about my earlier comments, among multiemployer defined benefit pension plans that like to treat service with each contributing employer separately, it is usually defined benefit plans, to get more than one Section 415 limit from the same plan. With defined contribution plans, if the 25% of pay limit is the issue, this treatment may not help in testing the limits.

To address your question: For 415 limit testing, plans maintained by the employer are aggregated. Since the union is independent of the company, if the union contributes to the multiemployer plan, and the company contributes to the single employer plan, these plans would NOT be aggregated for Section 415 testing. This is because the two employers are separate. Note that the usual 80% common ownership test is only 50% for defining the employer for Section 415 testing.

[KJohnson]

John A, I assume it is a multiemployer plan (rather than a multiple). You would have to aggregate your single employer plan with the common participants in the multi for purposes of 415 to the extent of benefits or contributions provided by the employer to the multi on behalf of those common participants See 1.415-8(e) and 1.415-1(e).

In other words, you would add together the employer's "additions" for the employee under you single employer plan to the employer's "additions" for the employee under the multiemployer plan.

However, if the employee worked for another employer under the multiemployer plan during the limitation year (e.g. working as a part-time employee for the union or working for another employer), these additions are not required to be counted. However, there is a discretionary rule where such additions would be counted--- 1.415-1(e)(2)(ii)--- as they would be if this was a multiple instead of a multi.

Clear as mud right?

The ADP testing can become even more interesting if you are in an industry where union employees can be HCEs. Do you have to aggregate the deferrals for both plans in your ADP testing for each plan pursuant to 1.401(k)-1(g)(1)(ii)(B). Are the plans mandatorily disaggregated for this purpose? ?