Annual addition limit / control group

[Guest terric]

First issue - Husband and wife - husband owns 48% of a corporation - other owned by another individual. Wife owns 100% of a completely separate company. The wife is on the payroll for the husbands company as well as her company. I believe this is not a control group situation?

Second issue, if I am correct in that this is not a control group, each company has their own separate plan, can the wife theoretically receive $42,000.00 in contributions for 2005 from both companies?

Thanks.

[JanetM]

Since wife is on husbands payroll you have attribution of ownership and a control group. Do these two have children? If they do you, again, have a control group. That means you have a control group situation.

The $42K is total for group annual additions.

[Belgarath]

First answer - if there is no controlled group or affiliated service group, then yes, she can receive up to the maximum employer contribution in each plan. (Note that this does not extend to elective deferral limits, which are an individual limit).

Second answer - based upon the information given I don't see this as a controlled group. But it certainly could be an affiliated service group. And depending upon who owns the other 52%, and what ownership could be attributed through things like stock options, minor children as Janet mentions, etc.,could even still be a controlled group. I always recommend a client seek legal counsel to make the CG/ASG determination.

[Guest terric]

The other 52% is owned by an unrelated person. There are no minor children from what I am told. The two companies are not in the same line of business. What would make it an affiliated service group - if one did business for the other? (Sorry, this stuff is always confusing to me)!

[JanetM]

Belgrath, I agree with you. I originally missed the 52% data point.

terric, yes doing businnes with one another would cloud the issue.

[Guest oxdougw]

I don't think you have a controlled group issue. There is not 80% common ownership on both businesses by 5 or fewer people.

The wife would be limited to one 402(g) limit however when combining deferrals into both plans.