Controlled Group Issue

[chris]

Seems pretty straightforward but just wanted to check with all of you... Individual A owns 100% of the shares of Corp T. Corp T owns 100% of the shares of Corps. U, V, W, X, Y and Z. Looks to be a parent-subsidiary controled group under 1563(a)(1). However, wouldn't recent 5500's for each corp's qualifed plan (401(k)'s) show the same number of active participants, etc..... if they are properly being reported as a controlled group???? Thanks for the help.

[R. Butler]

I assume that because there are multiple 5500's, the corps. are covered by different plans. If that assumption is correct why would the number of participants in Corp. T's plan necessarily equal the number of participants in Corp. U's plan?

[chris]

The controlled group issue would just require the multiple entities to be treated as one entity for certain plan qualification issues, e.g., coverage, eligibility, nondiscrimination, etc..... and would not mandate that a participant of Corp.s T's plan also be a participant in Corp. U's plan.....

[R. Butler]

I guess I don't understand your question.

If Corp. T's employees aren't covered by Corp. U & vice versa, etc. etc. why would you expect that they have the same participant count?

[chris]

uhhhhh.....stupid question, maybe....??? Good thing I don't ask very many of them...... Is there any prohibition against a member of a controlled group maintaining a prototype 401(k)? I noticed one of the plans is a prototype and one is not..... Thanks.

[R. Butler]

Maybe I'm just not understanding what you're asking. I don't see that members of a controlled group maintaining different plans will necessarily have the same number of participants. If they do it is likely just a coincidence. Just because you are considering a broad group of employees for coverage & testing issues, doesn't mean that every member of that broad group is a participant. They are different issues.

Is there any prohibition against a member of a controlled group maintaining a prototype 401(k)? I noticed one of the plans is a prototype and one is not..... Thanks.

Standardized or Nonstandardized prototype? There is no prohibition against members of a controlled group maintaining a prototype, but if its a standardized prototype the employees of all members of the controlled group will generally be treated as eligible employees for purposes of the plan unless the IRC Section 410(b)(6)© transition period applies.

[Archimage]

Maybe you are referring to the Sch. T? The total number of nonexcludable EEs should be the same on each.

[chris]

Actually the Sch T numbers are 0 b/c on one Sch T the plan benefitted all NHCE's and on the Sch T for the other plan the box for no HCE's benefitted is checked. Thus, I guess they meet an exception for running the coverage tests...? Thanks..

[R. Butler]

Are the plans permissively aggregated?

[chris]

Is there a line item on the 5500 or accompanying Schedules to find that out? Thanks.