Who is the "employer" for QSLOB purposes?

[Guest Kaister]

Our client is a wholly owned US subsidiary (company A) of a foreign company. Also, the foreign company wholly owns another US subsidiary (Company B) that is independent and separate, in all respects, from our company. Companies A and B each sponsor a 401(k) plan for their respective employees. Based on Section 414(b), companies A, B and the foreign parent are members of a controlled group which means employees in A and B must be aggregated for plan testing purposes. However, due to the difficulties with companies A & B cooperating in assembling the necessary information for a controlled group arrangement, Company A would like to designate itself as a QSLOB.

I have read IRC 414®, the regs thereunder, the preambles to the final regs and the proposed amendments to the final regs, and believe I have a good grasp on the elements required to become a QSLOB. However, none of these sources have shed light on who is considered the "employer" for purposes of filing the required Notice and submitting to the IRS a request for determination regarding administrative scrutiny.

Treasury Reg. Section 1.414®-4 provides that "[t]he employer's notice for the testing year must specify each of the qualified separate lines of business operated by the employer...." Further, the instructions for Form 5310-A states that "[o]nly one notice per employer ... is required." Based on those statements, it appears that the IRS contemplates the parent company file the notice on behalf of all its subsidiaries that wish to be designated QSLOBs. However, our client's foreign parent company has no interest in filing such a notice.

Instead, our client wishes to file the notice with the IRS on behalf of its own QSLOB status. It does not want to be responsible for Company B's own QSLOB status. Can our client file the notice on its behalf only; and then can Company B file its own notice? Similarly, with a request for a determination regarding administrative scrutiny, can our client submit a request for its own QSLOB status or does it need to be coordinated with the other members of the controlled group?

Any help or insight on this would be greatly appreciated.

Thanks!