affiliated service group?

[PensionNewbee]

Is it enough to be considered an affiliated service group if three entities, without being a controlled group, share the same address? One company falls under the definition of a service organization (consulting) the other is a PR or advertising company, and the third is a one person LLC?

What questions should I ask to determine ASG status?

[Belgarath]

First question should be,"Have you consulted with an ERISA attorney?" But beyond that, following the advice of Mr. Derrin Watson in his book, Who's the Employer," you could start with basic issues first.

1. Determine which businesses are service organizations. A business which isn't cannot be an FSO or an A-ORG.

2. Determine what corporations qualify for the professional service corporation exception. A corp that is not a PSC cannot be an FSO for purposes of the A-ORG test.

3. Determine if there is cross ownership. If no cross ownership, it could be part of a management function group, but cannot be part of a traditional ASG.

4. Determine principal business. If performing management functions is not the principal business, it cannot be the manager of a management function group.

Once you've answered these, you can move on to the more difficult questions, of which there could be many. I'd strongly recommend Derrin's book, or Sal Tripodi's "Erisa Outline Book" as sources that can assist you to understand some of the complexities. Personally, I avoid these questions like the plague whenever possible, and always have the clients discuss with their legal counsel.

FWIW, I would say that the mere fact that they are sharing an address does not, by itself, make them an ASG. It could just be 3 different businesses sharing office space. Good luck!

[PensionNewbee]

geez, it's never simple is it? I can see why you avoid these questions like the plague.

[PensionNewbee]

would an advocacy group (lobbyists) be considered a service organization? I suppose they'd fall under the nebulous "consulting" designation....

[Lame Duck]

I don't think you could consider lobbyists as providing a product, unless it's the inflation of a hot air balloon. Proposed Reg. Sec. 1.414(m)-2(f) defines a service organization as an organization in which capital is not a material income producing factor for the organization. This would appear to apply to lobbyists.

[PensionNewbee]

So what I really need to ask is:

Do the companies provide services to each other, do they together provide services to third parties, do the companies share clients, and is one company performing management functions for the rest of the companies.

Does that about cover it?

[jquazza]

The determination of controlled group/ASG is really a very touchy subject as it can very well be determined as an illegal practice of law for a TPA. My advice is let them consult with their legal counsel and give you a clear answer.

[PensionNewbee]

Jerome,

I'm not trying to practice law here, I am trying to understand the rules that apply to affiliated service group. I'm not stupid, and I don't appreciate your assumption that I am trying to to open this TPA shop to the liability created by making the determination for them. As I said, I am simply trying to understand the rules.

[Blinky the 3-eyed Fish]

Easy tiger.

[Lame Duck]

PensionNewbee,

I agree with Blinky. I don't think anyone was implying anything. it's great to want to know how the rules work, but the warning wasn't just for you, it was for all of us who get dragged into this kind of situation. I've been doing retirement plan work for 25 years, and have come across little that is as complex and confusing as the controlled roup and ASG rules. Over the years, I've probably performed hundreds of controlled group/ASG analysis and I dread every time a new one is presented to me.

[PensionNewbee]

Ok, you're right, I apologize. Maybe I'm a bit sensitive, but there have been a few other times I've posted on this site and gotten a royal dressing down from more knowledgeable posters.

[PensionNewbee]

and, with my tail between my legs, I'll ask yet another question. If the three groups have one client in common, does that make them an ASG? one company gets 42% of its income from the client, and the other 2 get 1% or so. The three companies perform services for the same client. Is the revenue a factor or is it an automatic ASG because of the one client?