Who's the Employer?

Answer: If the plan document permits it, yes. I anticipate that many multiple employer plans offered by PEOs will offer adopting employers such choices. Some may want safe harbor 401(k) plans; some may want deferral-only 401(k) plans; and others might want an employer match (but not be safe harbor). I see no reason that all three options cannot be offered in a single document.

Recall that all coverage and nondiscrimination testing is done separately for each employer under a multiple employer plan. This includes testing to determine if the benefits, rights and features of the plan are nondiscriminatory. With that, there is no reason other than administrative burdens not to tailor the plan somewhat to the needs of adopting employers.

It is important to realize, however, that for purposes of counting service for eligibility and vesting purposes, all service with all adopting employers is counted. Suppose Tweedledee and Tweedledum jointly sponsor a multiple employer plan. I've worked for Tweedledee since 1998, full-time. At the beginning of 2003, I leave Tweedledee and am immediately hired by Tweedledum. The instant I am on the payroll, Tweedledum must recognize my five years of service. I am a rehired participant for purposes of Tweedledum's plan. I'm also nearly fully vested.

Multiple employer plans are discussed in Chapter 18 of the new third edition of my book, Who's the Employer.

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