Aggregating FICA compensation from CG/ASG members for purposes of HPI determination for Roth catch-up

The final regs allow this. Other than for possible administrative simplicity/consistency, is there any other good reason to do this? I can't think of one. Most of our clients (we are primarily smaller plan market) would prefer NOT to be forced into HPI status if not required to do so.

Thoughts?

1 hour ago, Belgarath said:

The final regs allow this. Other than for possible administrative simplicity/consistency, is there any other good reason to do this? I can't think of one. Most of our clients (we are primarily smaller plan market) would prefer NOT to be forced into HPI status if not required to do so.

Thoughts?

It requires a common paymaster scenario, so I assume the good reason would be that you can just use the issued W-2 rather than breaking out how much each entity is actually responsible for. 

As some comment letters and the Treasury’s preamble explained, some plans’ administrators prefer to have no responsibility to look beyond a Form W-2 wage report. In some circumstances, one W-2 might include wages from employers other than the employer through which the participant is a participant under the plan to be administered.

Beyond practical administration in applying a plan’s I.R.C. § 414(v)(7) provision, I’m unaware of a reason a plan’s sponsor or administrator would have for depriving a participant of an otherwise available opportunity to elect non-Roth deferrals.

@RatherBeGolfing Just to be clear... optional aggregation is permitted in 3 circumstances stated generally as:  (i) employers using a common paymaster (not that many employers actually meet the common paymaster rules because it should only cover "concurrent" employees), (ii) an employer and one or more other employers in a 414(b), (c), (m), or (o) control group, and (iii) for successor employers in asset purchase. See § 1.414(v)-2(b)(4)(ii), (iii), (iv) Federal Register :: Catch-Up Contributions

Administratively it could be an issue where several controlled group members participate in the same plan and employees work across multiple entities in the controlled group or are transferred between the entities.  Without aggregation, mid-year transfers could cause the employee's catch-ups to be characterized differently, so there will need to be more communications with the employees to minimize confusion.  

Certainly more reasons not to do this but it depends on the employer and their structure.

On 10/3/2025 at 5:29 PM, Artie M said:

@RatherBeGolfing Just to be clear... optional aggregation is permitted in 3 circumstances stated generally as:  (i) employers using a common paymaster (not that many employers actually meet the common paymaster rules because it should only cover "concurrent" employees), (ii) an employer and one or more other employers in a 414(b), (c), (m), or (o) control group, and (iii) for successor employers in asset purchase. See § 1.414(v)-2(b)(4)(ii), (iii), (iv) Federal Register :: Catch-Up Contributions

 

Artie, thanks for the correction!