control group/ affiliated service group

[Guest letmeup]

Company A (which is a dental practice) currently has two partners and a simple ira plan. The two partners each have a spouse and all four participate in the simple plan.

Company B is a new venture that will be making dental crowns. The idea is to remove the spouses completely from company A. The two spouses would then become equal partners in company B. It is anticipated that the revenue will be derived from selling crowns to Company A and other dental offices.

Company B would like to open up a retirement plan which will only have the two spouses as employees.

Is this possible or does it violate control group or affiliated service group rules?

If this employer decides to adopt this plan regardless of control group or affiliated service group risks, how does the irs find out about this?

Also, given that they are the spouses of the owners of Company A, could they adopt another qualified plan other than a simple ira given that Company A maintains a Simple IRA?

Thank you for your help!

[R. Butler]

Is this possible or does it violate control group or affiliated service group rules?

There are potential controlled group/affiliated service group issues with the situation you describe.

If this employer decides to adopt this plan regardless of control group or affiliated service group risks, how does the irs find out about this?

They audit.

Also, given that they are the spouses of the owners of Company A, could they adopt another qualified plan other than a simple ira given that Company A maintains a Simple IRA?

If the companies are either a controlled group or ASG, both Co. A & Co. B would be a single employer for purposes of the SIMPLE IRA. Also Co. B would not be able to adopt its own plan if Co. A continued to maintain the SIMPLE IRA.

Just looking at your question & the way that it is phrased, it doesn't seem like you have a lot of experience. This situation should be referred with some experience in this area.

Hope this helps.

[alanm]

One thing to consider: section 1563 e(5), I believe, causes stock attribution if the couples have a child under the age of 18.