What to count as compensation in a controlled groutp

[Santo Gold]

Company A and Company B are part of a controlled group, owned by 3 individuals. All 3 individuals have compensation from Company A and B. Both companies are part of Company A's 401k plan. There is also a management group (Company C) that has no employees, but consists only of the 3 owners. They have compensation from this entity as well.

#1 Is it correct that all 3 company's are part of the controlled group?

#2 Because Company C contains only HCEs, we would not necessarily have to include it for plan purposes (i.e, no chance of discrimination since they are all HCEs)?

#3 If Company C is part of the CG, but is not part of the plan, would we omit compensation from Company C for plan purposes?

#4 Is Company C compensation omitted for 415 compensation purposes?

I believe the answers to the above are:

Yes, Yes, Yes, I'm not sure. Thanks for any replys

[J Simmons]

#1 Whether C is part of the CG depends on stock proportions owned by the three in each entity.

#2 The exclusion of C would not have discrimination implications, since it would only exclude HCEs.

#3 If C had a nonHCE that was also employed by A and B, would you only take into account the nonHCE's earnings from A and B? That would invite some abuse--underpayment of the NHCE by A and B, with a corresponding overpayment of the NHCE by C. Doing so would depress C's plan earnings, if you don't count earnings from C. I don't think you could do that. Thus, it would make sense that you'd include earnings from C (if part of the CG with A and B) of the owners who also work for A and B.

#4 For the reasons stated in #3, I think this would be yes.

[Blinky the 3-eyed Fish]

#3 For nondiscrimination purposes you count compensation with all related employers. Whether or not you would count it for plan purposes depends on how the document reads. Some docs will automatically count the compensation of all related employers; some docs require the related employer to adopt the plan. If the latter and you have NHCE's in C, you have general testing to do.

#4 Count compensation for 415 with related employers.