Section 105 plan - Affiliated Service Group - Highly compensated emplo

[Guest Jae]

Here is the situation:

About 40 doctors, all of whom are the sole shareholders and sole employees of their personal service corporations, form a Group to provide services at a hospital. The Group is a corporation. The Group and the personal service corps will form an affiliated service group. The doctors all have medical reimbursement plans in place with their personal service corporations. In order to avoid problems with discrimination, we would like all of the doctors to be considered highly compensated. The only way I can see to do this for each doctor in the Section 105 context is to have them all be 10% shareholders of the employer (105(h)(5)©).

My question is: Which corporation is the employer in this setting, is it the Group (in which case no one is a 10% shareholder) or can it be the personal service corporation (in which case all are 10% shareholders)?

I'd appreciate your thoughts.