How do you deal with affiliated employers?

[SteveH]

Husband and Wife, 2 companies, both want a plan. Wife is a pediatrician owns 100% of her practice. Husband is a neurologist owns 100% of his practice. Based on controlled group rules at first look I figured controlled group, but now not so sure because they are competely seperate businesses and neither is employed, manages, or has any decision making capabilities in the other's business. Maybe that is irrelevant though.

Regardles. we have 2 companies with no other employees and it seems silly for them to have two plan documents, and pay for two completely seperate administrations. I know that one company could sponsor the plan and then the other company could adopt the plan as an affiliated entity.

My confusion comes up in how many 5500s are required? One person in my office says that she has this same situation for one of her clients and they only file one 5500. Another person in my office says she would file two 5500s.

I am trying to quote a price and of course it depends on how much work is involved here. So...

1) 1 document or two?

2) 1 adminstration package or two?

3) 1 5500 or two?

[Blinky the 3-eyed Fish]

One plan, one 5500. One plan, one document. If unrelated employers adopt the plan, you just have a multiple employer plan. You used to have to file multiple Sch T's.

Your analysis of the controlled group is the exception under 1563(e) (I think that's the right cite). However, if you are in a community property state, that goes out the window and they are a controlled group. There is also the child under 21 argument that some say will make it a controlled group.

[Guest Pensions in Paradise]

Just curious - how can neither one have any employees? Are the doctors independent contractors of a hospital?

[Peanut Butter Man]

Blinky is correct about the Code cite - 1563(e)(5) is the spousal rules for constructive ownership. I am curious about whether they are a controlled group due to have a minor child. 1563(e)(6) is one of my favorite Code sections when it comes to evaluating controlled group situations. Treas. Reg. 1.1563-3 contains examples.

[SteveH]

Pension in paradise - yeah, one is a neurologist does work at a hospital and the other does some work at a clinic. They are considering purchasing 50% of a company that does have employees so that could change everything, but i think the purchase is more of a hobby and coud be avoided if it makes more sense not to.

I wondered the same thing about the no employee deal. About half the time I hear that it ends up being that they are leasing their employees or something worse. Of course I will make them certify again that they really have no employees if they want the plan.

Peanut butter man - honestly I had never even heard of that cite. I thought your spouse always owned whatever you owned. My spouse sure seems to act like it at least. Only reason it came ot light was my company had this little spreadsheet that someone put together that mentioned it. I think maybe TAGDATA provided the spreadsheet, but don't quote me on that.

The minor child always seems to throw this stuff off, but it doesn't make sense that it does. I mean, I have heard of the "marriage penalty" when it came to taxes, but come to find out there is a "parental penalty" too?! I know everyone says you can't count on laws making logical sense, but this just seems ridiculous.

This means that a couple can be married for ten years, and run two fabulous retirement plans without a controlled group for all that time. Then BAM they have a baby and the whole thing stops?! Lord knows tons of things stop the moment you have a kid, why your pension plan too? It's just not fair.

[Blinky the 3-eyed Fish]

To be clear, it's not a certaintly that a minor child causes the 1563(e)(5) exception to be voided. A literal reading of the code/regs, says yes. A practial reading (dangerous to attempt) says no. (BTW, if you never heard of that cite, you would have concluded they are a controlled group by attribution, no?)