multiple retirement plans

[Bees Knees]

I think the key words here though are "your contributions." The employee does not make contributions, the employer does. I still believe this means that if an employer has multiple plans, including a SEP, the employer must aggregate the SEP contribution with contributions of other defined contribution plans.

I have a couple of calls out to associates who practice in this area and will let you know what they say.

I would be curious to what the pros in this area say. I admit I am not a pro in this, and can only interpret the code based on how the IRS Pubs interpret it.

But it seems redundant to me to have Code Section 414(f)(1) talk about more than one employer and say they don't have to aggregate plans as long as it is a Union Plan, IF in fact all multiple employers are already excepted from having to aggregate plans simply due to the fact that they are not the same employer. I would be curious to hear what the pros have to say about Section 414(f)(1) and why that is even in the code book.

[Bees Knees]

I take it you have now addressed you opinion "only" to a self-employed person and therefore agree with unrelated employer SEP-IRA plans making max contributions?

I would like to know the purpose of having code section 415(f)(3) and 414(f)(1) which makes an exception for multiple Union Plans if as you say, non-related employer plans are already an exception to the rule that requires you to aggregate plans.

[abby]

my experience

I am hugely far away from being an expert in this field - I'm lucky enough that a spouse of one of the other employees here does pension stuff for a living, so I often ask her questions when these issues come up.

My only 'contribution' to this discussion is that a couple of years ago I had a high earner come in with two W2 and combined he had deferred compensation above the annual limit between the two of them.

After looking into this for him, he removed the excess from one of the plans and we reported the income and earnings accordingly.

However, in all the discussions I had with my resource, there was never any mention that his employer had to remove any contributions the employer may have made into the plan. I realize that if there was a match he could/would have lost that, but any contribution not based on his deferrals probably stayed in the plan.

[JON]

Old Jack

I think he has stated it perfectly. Your refers to the particpant(s) not the employer. I have one person who sits on some boards of directors other than his own corporation which has a plan, not 401(K) in this case, he has always maxed out his contributions on the Sch C for his retirement. He does not own the corporation he is salaried at.

If you have an employee who is eligible to participate in your plan, but you tell him I know you work for ABC and your covered by their plan so I am not going contribute for you to my plan. ERISA would have your office in a BIG fix.

Pretax participant deductions from multi employers-there are hard limits on that. Related corporations major rules on that. ERISA will make the best plan cover all.

Keep Old Jack-your east coast connection.

[OldJack]

I would like to know the purpose of having code section 415(f)(3) and 414(f)(1) which makes an exception for multiple Union Plans if as you say, non-related employer plans are already an exception to the rule that requires you to aggregate plans.

Union employees that participate in a trade union plan (Carpenters Union, Plumbers Union, etc) are excluded from participation in other plans the employer has for non-union employees, thus the exception from aggregation by the employer when the employer is calculating the plan that the employer administers for his other employees.

(f) Multiemployer plan
(1) Definition
For purposes of this part, the term "multiemployer plan" means
a plan -
(A) to which more than one employer is required to
contribute,
(B) which is maintained pursuant to one or more collective
bargaining agreements between one or more employee
organizations and more than one employer, and
(C) which satisfies such other requirements as the Secretary
of Labor may prescribe by regulation.

This code §414(f)(1) is not relevant to our discussion unless you want to talk about union plans where various employer businesses (usually contractors) contribute, for union employees, to the union plan administered by the trade union. You don't find anywhere in code §414 anything about combining plan limitations of unrelated businesses.

(f) Combining of plans
(1) In general
For purposes of applying the limitations of subsections (b) and
(c) -
(A) all defined benefit plans (whether or not terminated) of
an employer are to be treated as one defined benefit plan, and
(B) all defined contribution plans (whether or not
terminated) of an employer are to be treated as one defined
contribution plan.
(2) Annual compensation taken into account for defined benefit
plans
If the employer has more than one defined benefit plan -
(A) subsection (b)(1)(B) shall be applied separately with
respect to each such plan, but
(B) in applying subsection (b)(1)(B) to the aggregate of such
defined benefit plans for purposes of this subsection, the high
3 years of compensation taken into account shall be the period
of consecutive calendar years (not more than 3) during which
the individual had the greatest aggregate compensation from the
employer.
(3) Exception for multiemployer plans
Notwithstanding paragraph (1) and subsection (g), a
multiemployer plan (as defined in section 414(f)) shall not be
combined or aggregated -
(A) with any other plan which is not a multiemployer plan for
purposes of applying subsection (b)(1)(B) to such other plan,
or
(B) with any other multiemployer plan for purposes of
applying the limitations established in this section.

Note that the code 415(f)(3) is making an exception for Union Plans that the employer is making contributions to because the Union Plan, admisitered by the Union, is the one controlling the contributions where are usually based upon an hourly wage basis as far as the employer contractor is concerned.

[JON]

Bee's Taxes SEP Plan-make your vote

Bee's prepares 2,106,227 individual income tax returns during tax season without filing one extension. To do this Bees has 3 employees during tax season who put in 40-100 hours a week. Does Bee's have to contribute to his SEP plan for "all" of them? One is an attorney who makes participtes in his company's 401K to the max and the employer max s their contribution on his behave to a defined contribution plan. The other two are retired, but LOVE tax seasons. All have worked the previous five years for him making over $100,000 a piece.

Does Bees have to contribute? Does he have to inquire as to what other retirement plans they are involved in and what contributions have been made... All want the contributions and Bees maximizes his contribution.

I contend Bees has to contribute to his employer spnsored SEP for all.

It has been a long day/week/month here..... You do great work Bees and your postings are truly appreciated. Welcome Old Jack- Show Me State is a super contributor. We all beneift from these two.

[OldJack]

Nice comment JON..., thanks.

[Bees Knees]

I concede the issue that the 415(c) limits do not need to be combined in the case of unrelated employers. Regulation section 1.415-8 seems to make the point very clear that the rules requiring the aggregating of plans applies in the case of affiliated employers, such as in the case of a controlled group of corporations, or businesses under common control, as would be the case with multiple sole proprietorships, partnerships, and closely held corporations with the same or similar shareholders. It appears that Section 414(f) in the case of Union Plans seems to have been written to provide an exception for controlled groups of corporations in that their plans do not have to be combined for their union employees.

So in the case of the statement made in IRS Pub 560, where it tells you to combine your SEP contributions with your other defined contribution plans, that statement seems to have been made in the context of a self employed individual who maybe owns another business with a defined contribution plan. For example, a more than 50% shareholder [Section 415(h)] in an S corporation that has a profit sharing plan would have to combine contributions in that plan with SEP contributions for a self employment business.

[skhyatt]

Great

This was a very informative and helpful thread, thanks all.

[nickel]

I realize that I'm digging up a thread that has long since died, but I have been searching for information on pretty much this exact topic, and have largely come up empty. I am in a very similar situation, in that I have a day job with a compulsory defined contribution plan, as well as optional 403(b) and 457(b) accounts. I also have a substantial amount of self-employment income through an LLC with the income passing through to me as a sole proprietor. I want to sock away as much as possible, but also don't want to run afoul of "The Code."

As near as I can tell, I should have separate 415(c) limits for my day job and my self-employment work since the income for each stems from totally unrelated employers, such that I can go to town on my "at work" plans and also stash away up to $45k in a SEP-IRA. According to the overall tone of this thread, as well as my read of the IRC and random articles I've run across, this is true. Any objections? If so, on what grounds?

Another question I have regards my defined contribution plan. This plan involves a compulsory 5% contribution plus matching funds from my employer. When I started I was given a choice between a defined benefit plan (pretty much a traditional pension, with the same contribution rate) or the defined contribution plan. This was a one-time, irrevocable decision, and participation in one plan or the other isn't voluntary -- everyone has to choose one and then contribute at a pre-defined level. As I understand it, the 415(c) limit applies to "elective" deferrals, and my feeling is that my contribution aren't elective. So do these contributions (employer as well as employee) count toward the limit? The reason that I ask this is that the sum of my defined contribution plan plus the 403(b) and 457(b) plans slightly exceeds the 415(c) limit of $45,000. But if the defined contribution plan doesn't count toward this limit, then I am in the clear.

I have written a detailed account of my situation elsewhere:

http://www.fivecentnickel.com/2007/05/24/help-needed-multiple-employers-and-the-415c-limit/

but have tried to capture the essence of things here.

Any and all replies are welcome.

[Bees Knees]

The 2006 version of TTB, page 13-4 changed the example so that Rick is a 100% shareholder in his corporation, making the corporation and the self employment activity under common control. No example is given in the case of a taxpayer who is an employee of two separate employers who are not under common control.