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What is the basic difference between Related Employers & Multiple Employer Plan?


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Posted

Can anyone tell me the impact on 401k plan between Related Employers & Multiple Employer Plan?
Sometimes, I've found mark on Related ER in the plan document, some times marking on Multiple Employer plan.

Thank you in advance!

 

 

Posted

Generally, related employers are those that are in a control group or affiliated service group of employers. You consider the related employers as a single employer when applying the qualified plan rules for such things as coverage and nondiscrimination. Example, A is parent company that owns 100% of subsidiaries B & C and sponsors a 401(k) in which employees of A, B & C are all eligible to participate. This is considered a single employer plan.

A multiple employer plan is a plan in which more than one unrelated employer participates. Example, companies A, B & C are each owned 100% by three separate unrelated individuals who are friends from college and decide to adopt the same 401(k) plan for their employees to gain economies of scale. This would be a multiple employer plan.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

Posted

As an FYI, I had always considered a "Related Employer" to be a firm that had some connection (like 1 person owned 100% of A and 50% of B with another person owning the remaining 50%) whether or not it actually reached controlled group or ASG status. Found out a short while ago that the plan document actually defines Related Employer and it has to be part of CG or ASG. 

Others might have already known this but I had assumed incorrectly. Pays to RTFD.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070

 

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