Sitting on the horns of a dilemma

[Guest Dash02]

An issue exists as to whether an affiliated service group exists involving a long-standing client that maintains a C-T P/S and 401k plan. A few years ago, the owner's 2 adult children started a new company in the same industry, but which pursues a different market segment. The new company maintains no plan and the two kids stopped working at "Dadco" and work exclusively at Kidco.

For a variety of reasons, it was decided not to seek a ruling as to ASG status. I have been running c-t calculations each year and determined that the tests passed whether an ASG existed or not.

Then, in 2008, the owner's son-in-law, who is married to the 51% shareholder of the new company and who works for both companies, suddenly made large 401k contributions. If an ASG exists, he is an HCE in Dadco and the ADP test is failed. If no ASG exists, he is a NHCE and the ADP is passed.

If the ASG status is not resolved by the end of 09, we risk disqualification no matter what action is taken. If we distribute out excess 401k to the son-in-law and it is ultimately found that no ASG exists, we have violated the 401k distribution rules. If we don't distribute and an ASG exists, we have failed ADP.

Is there any way to get a ruling before year end? Anyone have a contact number to the irs where I can discuss the problem with a human being and expidite the process? Any other thoughts?

[PensionPro]

In response to your last question, here are a couple of other options:

1) get a written legal opinion from an ERISA attorney, or

2) post the details on this forum, and maybe someone can guide your determination

[PensionPro]

In case you did not already have the phone number, you can call The Service at (877)829-5500 for your qualified plan questions.