Affiliated Employer?

[Guest Michael Anderson]

We have two companies. Company A is owned equally by six people and Company B is owned equally by four people - three of which are also owners in Company A. Each Company has a 401(k) Plan. Are the three who are owners in both companies affiliated employers?? Thanks again for your insight!

[E as in ERISA]

So U,V,W,X, Y and Z each own 16-2/3 percent of A and T, U,V and W each own 25% of B. U, V and W are the only ones who own an interest in both. They own 50% of A and 75% of B; their identical interests are 50% in A and B. They fail the 80% test (so it is irrelevant that they pass the 50% test). They are not under common control.

However, there is not enough information to tell whether they are in an affiiliated service group (which applies in services companies -- where "ownership" may be manipulated -- and there are other determining factors).

[rcline46]

Also need to know relationship of owners - spouses or lineal ascendents/decendents to determine attribution which could change Katherine's analysis.

[Guest Michael Anderson]

U, V, W, X are siblings and Y and Z are the parents. They are trucking companies - neither the assets or the employees are shared. Does this info make a difference? Thanks.

[E as in ERISA]

How old are the siblings?

[Guest Michael Anderson]

33, 36 and 41

[E as in ERISA]

It is likely that they would not be treated as a controlled group. The group of five or less persons who own stock in both companies don't control 80 percent of each company. There is not a person or group of people who can control the decisions about plans for both companies.

The parents as generally treated as one shareholder (assuming they are still married -- and there are other exceptions). But adult children generally don't have to be aggregated with parents (unless the child has greater than 50% ownership).

It doesn't hurt to check with corporate tax counsel and confirm that they are not treated as affiliated for corporate tax purposes (i.e., that they are not filing one tax return or sharing tax attributes).

[jaemmons]

It doesn't appear that there is a controlled group here, based upon your information. The only attribution seems to occur between the parents (since neither of the parents own more than 50% and their children are over 21), but since they don't own any interest in company B, I would have to say that Katherine's prior post looks like a plausible opinion.