LLC members - participation in cafeteria plan

[EGB]

I realize that an employee of an LLC that also is a member of the LLC cannot participate in a cafeteria plan sponsored by the LLC. Do any attribution or constructive ownership rules apply when an employee is not a direct member of the LLC, but is an "indirect" member? For example, assume that a corporation owns 100% of the LLC and an employee of the LLC owns 1% of the corporation. In this example, is the employee deemed to be a 1% member of the LLC for purposes of eligibility to participate in the cafeteria plan? I think the answer to this is no, but I want to make sure that I am not missing anything. Any help would be greatly appreciated. Thanks in advance for any responses.

[jmor99]

You are correct, the answer is "no" from an indirect standpoint. What needs to be carefully considered is whether or not he meets the definition of an HCE for testing purposes. To determine who the HCEs are, you must first know who the employer is. In this case, there may be a controlled group issue. Under sec. 125(g)(4), "all employees who are treated as employed by a single employer under subsection (b), ©, or (m) of section 414 shall be treated as employed by a single employer for purposes of this section."

The parent corp should already know the answer to this, especially if they have a 401-k, since controlled group issues are addressed in a 401-k.