Two commingled plans in one trust fund?

Good afternoon to all:

An existing client with a 401(k) plan for his Company A at John Hancock has made us aware that he owns 50% of another very small Company, B. An unrelated partner owns the other half of Company B and has nothing to do with Company A.  Company B has 5 employees, 2 of whom want to participate in the 401(k) plan of company A. 

Since our client does not own 80% of company B, we do not have a controlled group.  We just also found out that we definitely do not have an affiliated service group.  We are going to do a separate plan for Company B.

However, only for purposes of funding the plan for Company B, could the two people who want to participate be added to the existing plan at John Hancock for Company A?  It's probably going to be expensive to set up a separate trust arrangement at John Hancock for just two people in a tiny plan, and we were wondering if they could be added on to the Company A plan just for funding purposes.  They could be listed as a separate "division" just to make it easy to spot them on reports, but is there anything "wrong' or "illegal" about putting on two employees who are in a different plan?

Thoughts?  Your advice is appreciated.

Look into the rules for Multiple Employer Plans and consider having Company B be an adopting employer of Company A's Plan.

Lou, it's good advice but we just don't do MEPs.  We are a tiny shop with tiny clients and tiny plans.  MEPS are outside our wheelhouse.

This is a pretty common situation, and Lou's advice is usually the simplest approach for a small add-on entity like this.  Yeah, technically it's a MEP, but it's not much of a MEP and not a big deal to administer.  The biggest challenge I've run into with 4k plan recordkeepers is handling two different payroll sources, they don't like to do that.  Using a common paymaster is one way to address it, and depending how your owner/client is being paid from each entity, potential payroll tax savings is possible.  They should discuss the common paymaster with their CPA if they want to look into it, there are ownership requirements (I think 50% but been years since I dealt with this).  

You also need separate testing and, if JH is going to only have one account, their reporting may not make it as easy (even with divisions) - but not impossible. 

I agree with other posters - this is not that difficult.  We are a tiny shop with tiny clients and have done it.  I don't think I would create two separate plans and then try to cram them into one "plan" at the recordkeeper.

There's nothing that says MEPs have to be huge plans. You can have tiny MEPs - we have several in our office. The basic things you need to know about a MEP are:

• Coverage, non-discrimination and top heavy are done as if they were separate plans
• Service is combined for eligibility and vesting
• On the 5500-SF, check the box for multiple employer plan and see the instructions for the required attachment

The topic at hand intrigued me, if only because I've got some local towns who were set up with both their deferrals and town contributions under the same contract with a recordkeeper.  The employee amounts are on a 457(b) document and the employer amounts are on a 401(a) document but it's all combined on the platform.  I consider the deferrals part of one trust and the rest the other.

Thank you all for your replies.  I think we are going to look into how to do a MEP.  In the meantime another situation has arisen with 4 pharmacies where a MEP seems to be the only logical solution.  Looks like we are going to have to figure this out sooner or later so it might as well be now.