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Full Version: Ownership %-ages in Affiliated Service Group
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J Simmons
Situation: Co A is owned 100% by Z. More than 1/2 of Co A's business is providing management services to Co B owned 100% by Y. We have an affiliated service group.

Co B sponsors a DB plan for Y, the sole employee of Co B. In determining if Z can waive participation without causing a discrimination testing problem, we need to determine if Z is a 'key employee' (since Z is not by earnings alone an HCE and we'd not want to have to make top-heavy minimum contributions for Z if he waives).

The key employee question resolves into what ownership percentage is Z considered to have. The relative revenues of Co B to Co A are 10:1. So, in deciding if Z is a key employee with respect to the plan, how do we determine what percentage Z is considered as owning of the affiliated service group? Is it 100% ownership because Z owns 100% of Co A, one of the constituents of the affiliated service group? Is is 9.09% (1/11) based on relative revenues generated by the companies? Or is some other measure the appropriate one?
Blinky the 3-eyed Fish
You fail 401(a)(26) if Z is not in the DB plan accruing meaningful benefits.

Z is an HCE and key. He is a 100% owner. You don't water it down.
J Simmons
Ouch. Back to the drawing board for a Plan B.

Thanks Blinky.
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