Profit sharing contribution allowed?

We have 401(k) plans that cover 4 businesses using participation agreements between the plans, using one of the plan documents as the master plan.  There is common ownership among the companies, making it a controlled group.  Plan provisions allow a discretionary profit sharing contribution.  One of the companies has had a very profitable year, while the other 3 only so- so.  Can the successful company make a profit sharing payment, while the other 3 do not?  Also, Successful company's owner (100%) does not take any salary, so would not benefit from the profit sharing payment.

Mods, can you move this post into the 401(k) forum? This is not a multiemployer plan question.

To the actual question, in a controlled group situation the employers are considered a single employer for most purposes. You would have to read your document to see what it says, but if the contribution is discretionary then there shouldn't be an issue with differing amounts coming from different companies.

I put it in Retirement Plans in General. FWIW I don't even notice what forum things are in because I use My Activity Stream.

I agree, this depends on the document(s). If this is set up with participation agreements, so it is effectively separate plans, no problem (subject to testing). If it is set up as one plan with adopting employers, then not so easy; you'd need each participant in their own group.

On 2/13/2024 at 4:04 PM, C. B. Zeller said:

if the contribution is discretionary then there shouldn't be an issue with differing amounts coming from different companies.

Seems like ACP testing still applies, but if there are no HCEs besides the owner, then no problem.

Sure, different contributions for different group members would be fine if permitted under plan document.  Plan document -- always see what it say first.  Test for discrimination within the group as you normally would.  If only NHCEs in the group receive the contribution, obviously no problem.  Otherwise NHCEs vs. HCEs.