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Hi - I am wondering whether the employees of entities owned by a fund; e.g., a Mutual Fund, must be aggregated with employees of the Fund's management company. It seems there should be an exemption but I am not aware of any. Facts: An investment fund (the "Fund") obtains its employees from a Management Firm. Ownership of the Fund and Management companies is not sufficient to make them a controlled group; however, they are likely an Affiliated Service Group. The management firm sponsors a qualified plan covering its own employees. The Fund owns 100% of several companies that offer retirement benefits with much lower contributions/benefits than those of the management org’s plan. Some of the companies owned by the Fund are held as passive investments only ("Passive" entities). Other companies are actively managed by a small group of employees of the management company ("Managed Entities"). Issues: 1. Must employees of the Passive entities be included in coverage/discrimination testing of the Management Org’s plan? 2. Same question as above with respect to employees of the Managed Entities. Proposed Answers: 1. The passive entities need not be counted in discrimination testing because: a. They are not part of a controlled group with the Management Company b. They do not render or receive services to/from the Management Company. 2. The managed entities need not be counted in discrimination test because: a. They are not part of a controlled group with the Management Company; and b. Whatever compensation they pay for service from employees of the Management Company will represent an insubstantial portion of gross revenues of the Management Company Additional Thoughts: I believe there are clear rulings in the area of Prohibited Transactions providing that passive investments are not treated as prohibited parties. I would think a similar exemption should apply to entities that are primarily owned as investments, even if they get some services from employees of the investment fund. Thanks very much for your feedback.