Controlled Group or not?

[Guest Phil L]

Company A is a parent company located in the United Kingdom. Company B is wholly owned by Company A and Company B is located in the US. Company C is also wholly owned by Company A and Company B is also located in the US.

Would you agree that the plans of B and C will require coordination for testing since they are part of the same controlled group (with an overseas parent company)? If my understanding is correct, the employees of A would be excluded from the testing to the extent they are nonresident aliens with no US source income. However, all the employees of B and C would have to be treated as employees of a single employer, right??????????

[richard]

You are correct, employees of B and C have to be treated as being employed by the same employers.

A practical problem which I have encountered in these situations is due to the relationship among A, B, and C. As far as B and C are concerned, they (sometimes) don't care about each other. They just happen to be owned by the same parent, that overseas company "A".

Company A, being overseas, doesn't really understand why B and C have to be combined (for testing purposes); these silly US rules you know.

And if your client is Company B (and you have no access to Company A, the parent, or Company C), Company B has to get you Company C's information. Company C might not be willing to share that information with Company B.

(By the way, if you can get the necessary data and still cannot pass the 410(B)/401(a)(4) tests, consider using the separate lines of businesses rules.)

Good luck.