Controlled Group

[dmb]

Company A is 100% owned by Owner 1 and Company B is 50% owned by Company A and 50% owned by Owner 2. Owner 1 and Owner 2 are not related, there is no ownership attribution. Is this a controlled group?? and if not, is there a way to have a multi-employer plan where only one company is top heavy and therefore only the participants for the top heavy company must receive the top heavy minimum allocation?? Thanks.

[Guest dyoder]

The effective control needs to be more than 50%. Therefore, I believe that this is not a controlled group.

[Archimage]

I agree that this is not a controlled group. There is no common ownership among the two companies. Even if Owner 1 owned 51% this would not be a controlled group.

The two employers could adopt a multiple employer plan to do what you want. I think it would easier to adopt two separate plans.

[dmb]

Thanks for the help. I was pretty sure about the controlled group issue, not as sure about multi-employer possibilities.

[Guest cease]

One additional warning, make sure that the structure of these two entities does not result in an affiliated service group.

Also, not to be perceived as criticism, but you used the term "multi-employer" twice. The term multi-employer relates to plans that are maintained for collectively bargained employees. As Archimage points out what you may consider is a mutiple employer plan.

In regards to the top-heavy question, refer to 1.416-1, Q&A G-2. I think you will see that top-heacy can exist in one group and not the other and can be treated separately in a multiple employer plan (watch the vesting!)

One additional con to a multiple employer plan is that you cannot use a prototype plan, but must use a individually designed plan - this could result is added expenses.

[dmb]

Thanks again. I realized after the fact that i used the multi- rather than multiple, but thanks for the warning.

[E as in ERISA]

I think that if one employer fails to satisfy top heavy, then the whole plan is tainted. But I don't think that requires that each employer make minimum contributions. Not 100% about the latter, though.