401k - 2 plans?
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As our company looks to try to minimize the negative impact not passing our non-discrim test has on our HCEs, one suggestion that was thrown out by someone is, can we have two seperate 401k plans?
One for our largest division (the division that has no high comped but a large number of non-participants, this divison is the primary reason we fail our non-discrim tests) and one plan for our other divisions and corporate. Possible? If it is, what problems am I going to run into.
And if it is possible, then it would seem to me that it's a way to get around the non-discrim test for any company that has the same problem - which kind of defeats the entire purpose of doing the non-discrim testing.
One for our largest division (the division that has no high comped but a large number of non-participants, this divison is the primary reason we fail our non-discrim tests) and one plan for our other divisions and corporate. Possible? If it is, what problems am I going to run into.
And if it is possible, then it would seem to me that it's a way to get around the non-discrim test for any company that has the same problem - which kind of defeats the entire purpose of doing the non-discrim testing.
Comments
If they can't or won't contribute to Plan A, I can't imagine they would be able to contribute to
Plan B.
Plan A would cover all the other divisions which would include our HCEs but which also has a lot of participation by non-HCEs so the chances of passing are greater (or at least the risk of having to return contributions would be far less then today).
Each plan would be tested seperately, right? Or am I missing something and the plans have to be tested together? I can't seem to find the answer anywhere and reading the IRS regs is like looking for the proverbial needle in the haystack.
Thanks!
[url]www.401khelpcenter.com[/url]
to find a more definitive answer. Also, you could simply contact your plan administrator for guidance.
Good luck,
Dutch2
We've thought about safe harbor but the cost would be astronomical. We did compute the max our HCEs could contribute and it's right at 3%. Our non-HCE's contributed a whopping average of .7% last year (and yes, that decimal is in the right place). So our HCE's got back most of their contributions. It wasn't a happy day around here.
Our 401(k) provider is doing some preliminary non-discrim tests for us this year (they didn't do them last year, and I took over this role in mid-Nov so it wasn't high on the radar screen at the time). But our HCEs are not happy about only being able to contribute a couple of thousand.
Oh well, back to the drawing board.