multiple plans/ different contributions

a law firm has two 401(k) Plans,  plan 1 is for the Partners and Staff,  Plan 2 is for the Associate Attorneys.  

Plan 1 has deferrals and Profit Sharing (NEw Comp)

Plan 2 has deferrals only.  

There are HCE'S in both plans, and the plans have always passed coverage 

They would like to add a 2% match to Plan 2.     As long as it will pass coverage, is this allowable?   

Yes, as long as it passes 410(b) as a standalone plan.

Good Luck!

Don't forget top-heavy implications.

Top heavy implications?    There are no key employees in Plan 2 that will add the match.   Before the associate makes partner, they are transferred to the Partner plan.     I always thought that each plan was tested separately for top heavy.    Is that correct?   

This is a very standard law firm arrangement, and usually plan 2 for associates has a match, often smaller than the match in plan 1. As stated in prior answers the key is not to include keys in plan 2 and that both plans pass 410(b) on a standalone basis, then you can do whatever the heck you want.

I agree that having two plans aligned in this manner is a common law firm plan design.

However, it does raise an issue whether being an attorney who is a partner instead of an associate attorney is a hidden service requirement that doesn't comply with Code Section 410(a).  A law firm might frequently have an established practice that an associate becomes eligible to become a partner only after x years of service.

8 hours ago, MWeddell said:

I agree that having two plans aligned in this manner is a common law firm plan design.

However, it does raise an issue whether being an attorney who is a partner instead of an associate attorney is a hidden service requirement that doesn't comply with Code Section 410(a).  A law firm might frequently have an established practice that an associate becomes eligible to become a partner only have x years of service.

With lateral partners, etc., occurring so frequently, I don't think it's an issue. Partner vs. associate is a classification, not an age or service condition.

I like your result obviously.  The fact that this plan design is common enough that the IRS must have seen it helps.  Thanks for the discussion.