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Posted

There exists a control group of a staff plan who receive safe harbor contributions and individual Partner plans who contribute on an xtested basis, but do not receive a safe harbor; all plans tested together.

There is a new Partner. She would like to start her own plan on 11/1.  Although her plan will not have a safe harbor feature, does the staff plan limit her ability to start 401(k) for herself on 11/1? She has never been a participant of any of the involved plans.

Edit after receiving 2 responses below - this is not a control group, but an affiliated service group.

Posted

my concern would be if it is a controlled group, and she is the only one in the plan, how would her plan pass coverage?

1.401(k)-1(b)(4)(iii)(B) indicates you can't aggregate a plan using safe harbor with a plan that uses the ADP test. since coverage and nondiscrim have to be tested under the 'same conditions' this would seem to create a problem.

Interesting, I hadn't thought about the idea 'why would a partner only plan ever be safe harbor' but I guess this would be case. I guess HCEs could be excluded from the safe harbor . sure seems like around about way to do things.

Posted

Other concern - even if you can aggregate these individual partner plans for them to satisfy coverage (and nondiscrimination), then you also have to satisfy benefits, rights and features. Why are there individual partner plans? if these partner plans have features not available to NHCEs, such as self directed brokerage accounts, loans, in-service distributions, or whatever, then they are discriminatory regardless of contribution levels, NDT results, etc.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

Posted
18 hours ago, CuseFan said:

Why are there individual partner plans? 

It would be both cheaper and easier to put them all in one plan. The only possible down side is that the individual partners might get to see each others contributions.

  • 11 months later...
Posted

New partner to the above mentioned plan wants to start his own plan which will be tested in combination with all the other plans. The staff plan gets safe harbor, but none of the individual partners do although their plans mirror each other.  Seeing as it is past 10/1 for a new calendar year plan, can the new partner still start up his plan for current plan year so as to defer 401(k) and receive profit sharing?  Or should new partner limit current year to profit sharing and start 401(k) next plan year?

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