New client

Partnership - Profit Sharing Plan (no 401k) with 2 Partners and the rest are NHCE.

Comparibility formula - Group A Partners Group B all others

One partner wants to "elect out" or not receive his allocation of contribution.

Issues - deemed CODA? Failure to follow plan document; failure to satisfy 401k

What are the IRS ramificiations of this situation?

you have to follow terms of document. since he is a partner, he must receive a pro rata share provided to the group of partners.
poorly designed plan. they should have a class for partner 1, and a class for partner 2. that would avoid the problem

Wait it gets better. I just found an amendment to their document, changing to 3 groups, Group A Dr. X, Group B Dr. Y and Group C all others.

Is this bad? Seems bad. How do you fix something like this?

I don't want anymore new clients. I've got 1099's to do.

WDIK needs to add this to his greatest hits archive collection.

Harwood and Willie must be upset.

This brings back memories of Blinky's 5500 filing order thread.

well, the IRS has already said you could name people as classes in a cross tested plan, so that in itself is generally not a problem. If the ink on the amendment you found hasn't quite yet dried, then that is a problem...er be careful not to smudge the ink.

suppose instead the company had set up 3 plans
one for owner A
one for owner B
and one for all other ees.
now, would that be considered a CODA if owner B received nothing?

I have seen arguments either way on this issue regarding a possible CODA, the advice I have heard simply said make sure the amounts allocated to the different classes is done be a board of resolutions. in other words, for better or worse, it looks like it is possible to accomplish what you have in a single plan