Controlled Group

Facts: Company A and Company B are members of a controlled group and they adopt one single 401K plan with profit sharing discretionary component.  Can each company pass a separate resolution to fund a different profit sharing percentage each year.  Company A 3% and Company B 0% or some other %?

Only if the document allows it. 

Another thing to be aware of is coverage testing.  If the plans need each other to pass coverage, the separate profit sharing could be a problem.

Of course, Mike is correct that the plan language must at least allow for that, but in these situations we always write the plan that way. In other words, if, as is common, a controlled group has a single plan, the plan document should contain language that the contribution obligations for each company's employees are the financial obligation of their separate employer. Compensation is determined employer-by-employer, the tax deduction belongs to the employer, and based on different goals and financial performance, each employer may want to have different contribution rates.

Most likely not, since a controlled group is still a single employer plan.  You can, however, get around this rather easily by using a New Comparability Formula.  This would allow you to define the "separate companies" to each constitute a group for a specific allocation rate.  I suggest this removes all questionable coverage and operational compliance concerns, other than the need to pass testing for the rate groups.

1 minute ago, Below Ground said:

Most likely not, since a controlled group is still a single employer plan.  You can, however, get around this rather easily by using a New Comparability Formula.  This would allow you to define the "separate companies" to each constitute a group for a specific allocation rate.  I suggest this removes all questionable coverage and operational compliance concerns, other than the need to pass testing for the rate groups.

Below Ground, my answer assumed separate testing of each group, of course.

Mr. Bailey, you were writing your post at exactly the same time I was writing mine.  Right before I posted my reply, your post was listed.  Yes, I would automatically assume you fully understood the issue; of course.

OK, thanks Below Ground. And of course as I think your response implied, if each group separately meets 410(b), you can just test as separate plans, so could simply have different percentages for each company even without new comparability.