control & affiliated groups

[Guest Leonard]

I have a group that wants to start a 401k plan. The group includs 5 C corps, 1 S corp, and a 501C3. I asked for detailed information about ownership, principals ownership in other businesses and the sharing of employees and capital. They don't percieve a problem & did not provide. Does anyone have information/articles that outlines control group issues?

[Guest Thornton]

Leonard,

The ERISA Outline Book by Sal Tripodi is very informative. Also, at the recent Pentabs seminar, Derrin Watson had a good outline. Obviously, you cannot help the client without the requested information.

[Guest robin s vatalaro]

I have a Derrin Watson article (don't know if same thing as referenced above) that I use as my controlled group bible - if you e-mail me w/ your fax number I'll fax it to you. jabbafest@earthlink.net is my e-mail.

[Guest Mike Kimball]

Leonard:

You should walk away from the case if they won't give you the data to properly structure the plan to cover the requisite members of the group. Most clients/advisors who don't work full time in the pension field seldom "perceive" a problem until the IRS calls it to their attention. Then they want to sue somebody for bad advice. There could be conflicts with the "form" of the plan doc you use, i.e. requiring all members to be covered even though they may not want a particular member to be covered.

[This message has been edited by Mike Kimball (edited 10-28-98).]

[Guest Fred Farkash]

READ THE CODE and Regs. to IRC 414 (especially sections b,c,m,n,o) in its entirety for starters so you understand the issues and know what to look out for. I strongly agree with Mike Kimball. Walk away if they won't let you set up their plan properly or at least indemnify yourself sufficiently in contracts/writing from liability by documenting their failure to give you ownership info necessary to set up the plan properly. You may also run into a stumbling block in getting census data from the group to determine if they can pass coverage testing without including all members of the controlled group.

[Guest Laureen]

Any ideas on whether a governmental entity can be part of an affiliated service group? I determined "yes,"--we have a management service organization providing management services to a governmental entity--section 414(m)(5) would indicate yes. There is no guidance (proposed regs or otherwise) for 414(m)(5), but my boss (attorney) thinks that govermental entities were not meant to be "swept into" the affiliated service group rules, since most of the qualification rules would be different for the two entities' plans. Short of obtaining a determination letter on this issue--does anyone have any thoughts?