SIMPLE IRA - Control Group Issue

[Guest carolinawind]

We have company who is wanting to establish a SIMPLE IRA for their group (Company 1) The co. is a S-Corp with 5 Owners (assme A, B, C, D, and E), owning the company at 20% each. Two of the owners own interest in a Research Firm which is an unrelated business not receiving referrals or customers from Company 1. The two owners do not do any service work for Company 1.

There are 3 other companies with similar ownership opening Simples at the same time. Each are separate entities but do share the same owners.

I will try to summarize the ownership a little clearer below:

S-Corp #1

Owner A - 33 1/3%

Owner B - 33 1/3%

Employee X - 33 1/3%

S - Corp #2

Owner A - 25%

Owner B - 25%

Owner X - 25%

Owner Y - 25%

S - Corp #3

Owner A - 25

Owner B - 25%

Owner X - 25%

Owner Y - 25%

S - Corp #4

Owner A - 33 1/3%

Owner B - 33 1/3%

Owner Y - 33 1/3%

Owners A & B are covered by an unrelated 401K plan and are maxed out. And again, they do not do any service work for these companies.

My concern is whether this is an affiliated service group?

Thanks!

[Guest carolinawind]

affiliated or controlled actually?

[John Feldt ERPA CPC QPA]

2 and 3 are a Controlled Group.

The affiliated service group rules will require you to look further. You could have an A-Org group, B-Org group, or possibly a management group. I recommend that you begin with reading the proposed Treasury Regulations 1.414(m)-1 through 1.414(m)-4 to familiarize yourself with what things you will need to look into.

Also look at IRC 414(o).

[Gary Lesser]

Carolinawind,

You might wish to add some facts. What is the nature of each of the 5 businesses? What do they do and for whom?

So far, employers 2 and 3 should share one SIMPLE-IRA plan document.

I edited your question to add "(assume A, B, C, D, and E)"

You might also want to add that none of the owners are related.