DB Plan Maintained by Corporation that is Owned by an Irrevocable Trust under Code Section 414

[Guest EMM118]

I was wondering if anyone had experience in dealing with the situation that is described in the next paragraph.

A DB Plan is sponsored by Corporation A. Corporation A is owned by an irrevocable trust. Of couse, the only participants in the DB Plan are the husband and his wife who also own all the stock in Company B. Company B has employees who do not participate in the DB Plan. Because the irrevocable trust has an independent trustee, Company A and Company B are not required to be aggregated. Company B invoices Company A for certain non-management services. Of course, one needs to be careful that an affiliated service group ("ASG") does not exist.

This is not an arrangement that I created, but it is one that I am forced to deal with. At this point, I am dealing with the IRS on the potential ASG issue and potential DB Plan disqualification.

Please respond only if you have experience dealing with this situation. Do not respond to criticize this arrangement as that will not be productive.

Thanks in advance for your consideration.

Ed

[Mike Preston]

Call Derrin Watson. The client needs to engage an attorney at some level and, in this case, they might as well go straight to the guy who "wrote the book".

[SoCalActuary]

You have not described who are the beneficiaries of the irrevocable trust, since they own the profit interests of that trust. Are they covered under the attribution rules that would turn ownership back to the two employees?

I would not consider this issue without the knowledge of the beneficial owners.

[Guest mjb]

In order to answer your Q please provide the citation for the potential ASG issue that has been asserted by the IRS.

[Gary]

My impression is that the IRS is not considering the trust (in this situation) as a bonifide means of avoiding the controlled group or ASG issues. So the question might be how to respond to such an IRS position?

I don't know, but would be curious if anyone has any thoughts.