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Posted

Husband and Wife each have their own 401(k). They are a controlled group do to minor child . In completing their Ezs, the participant count should be 2 since the other spouse is eligible to defer but I do not combine the assets since they are separate pools. Correct?

Posted

Simply being a controlled group does not automatically make them eligible to defer in each other's plans. They would each have had to adopt the other's plan in writing. If that is the case, then I agree.

Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance.

Corey B. Zeller, MSEA, CPC, QPA, QKA
Preferred Pension Planning Corp.
corey@pppc.co

Posted
4 minutes ago, C. B. Zeller said:

Simply being a controlled group does not automatically make them eligible to defer in each other's plans. They would each have had to adopt the other's plan in writing. If that is the case, then I agree.

Not necessarily. It depends on plan language. The OP stated it as a fact. If it is not a fact the answer changes. 

Posted

they are standardized prototype plans so I believe the employer definition automatically sweeps the other spouse into their respective plans on a coverage basis...

Posted
1 hour ago, draper1 said:

they are standardized prototype plans so I believe the employer definition automatically sweeps the other spouse into their respective plans on a coverage basis...

Why?

There seem to be two different parts to that statement. 

1. Are related employers ( Control group, ASG) automatically part of a plan, or is an affirmative participating employer election by the entity required?
The document (a volume submitter) we use says Not automatically part of the plan, affirmative election is required. I have seen documents default the other way too, but unless you've read that part of the document, don't assume. 

2. Pulling in another employer due to coverage? Is there a coverage failure? The spouse's are HCE, so I don't see why it would be necessary to pull in another HCE due to a testing failure on a 401(k) plan. These aren't DB plans with minimum participation under 401(a)(26).  Even if there is a coverage failure, not all plan documents default to a fail safe that automatically pulls in extra employees to give them benefits. 

 

I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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