New controlled group and HCE status

[R. Butler]

Company A acquires 100% of Company B stock 01/01/01. For determining HCE's in 2001, do I consider compensation earned by Company B employees during 2000? It appears to me that I do (414(q) says apply controlled group rules before applying 414(q)), just want to double check though.

Thanks for any help.

[MWeddell]

Nearly none of these m&a situations are clear under current IRS guidance, but my most guess agrees with your guess, that one considers compensation of both Company A and Company B in determining the controlled group.

There are no new employers here because it was a stock acquisition. It's like there were two controlled groups that each consisted of a single company that have now been combined into one controlled group. Code Section 414(a) and regulations thereunder will make you recognize service from Company B and a consistent approach is that you recognize the compensation history too.