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"Owners" in own group. What about son?


BG5150

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PS Grouping method:

Owners in own group.

All others in a single group.

4 owners at 25%.

Son of one of the owners is a participant.

Is he in his own group? Or with all others?

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

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This is purely an interpretation issue. Some "Plan Administrators" may interpret "Owners" to mean direct owners and place the son in the group with all others. Some "Plan Administrators" may, instead, interpret Owners to include owners by attribution. They key here is that any Plan Administrator is not required to have the best interpretation, but merely a reasonable interpretation; and I'm assuming the plan's provisions have authorized the Plan Administrator as the authority in interpreting the plan's provisions. In the IRS's eyes, they don't what such interpretation to be arbitrary and capricious.

Good Luck!

CPC, QPA, QKA, TGPC, ERPA

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Usually such provisions are just blanks that are filled in by the adopter. We always try to use the term "direct" shareholder or owner to eliminate the ambiguity - especially when all the "owners" are lumped into one group. Without that distinction, it's a great way to fail a test.

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