Controlled groups -- basic questions

[Guest aearle]

1) In a controlled group, can each separate company have a Sec 125 plan? Or is it required that they all live under 1 plan? If they can have separate plans, can those separate plans have different benefits?

2) Along the same lines, if a parent company has a Sec 125 plan that covers all of its subsidiaries for core benefits (med, den, vision, and FSAs), can one of the subsidiaries put an additional but separate 125 plan in place to accommodate additional benefits for just that company? If they do, should all of the other subsidiaries have access to these additional benefits?

3) If there is a controlled group of 2 companies, can one of the companies implement a Sec 125 plan even if the other company is not included? Or, can the one company at least offer for the second company to be a part of the plan and the second company choose to decline?

4) Very basic! -- what is the basic determination of whether 2 companies make up a controlled group? If a single person owns 100% of both, is it a controlled group? If one company owns 25% of the other, is it a controlled group? If one company owns 51% of the other, is it a controlled group?

Thanks in advance!! (And is there a good article or place to learn more about this??)

[Mike Preston]

1. Yes. Yes.

As long as each plan satisfies the rules regarding non-discrimination, you are fine.

2. Yes. Not necessary. See comment to number 1.

3. Yes. Yes. See comment to number 1.

4. See the Guest column by Derrin Watson on this site, or see:

http://employerbook.hypermart.net/

Otherwise, Yes, No, No (but yes for 415 purposes - see 415(h))

[Guest Joe Vasko]

aearle,

Attached is an excel spreadsheet that will be helpful in determining a controlled group situation.

Joe