Another Control Group Question

[goldtpa]

Dr. G owns 100% of his MD PC. He also owns 90% of Company B which is his practice. Company B sponsors a PSP in which Dr G. gets the max contirbution. Dr G also owns 75% of company C. The other 25% is owned by a separate person. Company C performs services for company B but has other clients. Company C also has its own ee's. All three companys operate out of the same location.

Dr G wants to set up a 401k for company C and he wants to contribute the full 16,500 despite maxing out on his psp.

The current TPA said that B & C do not meet the brother sister rules or parent subsidy rules.

Lets see, 5 or fewer people do own more than 80% and the same 5 or fewer people own more than 50%. Am I missing something??

[Belgarath]

You have to first exclude persons without an interest in both companies, as per the Vogel Fertilizer decision. So for B&C, even though you have an "effective control" group, (more than 50%) that group does NOT have a "controlling interest" (i.e. 80%) - you only have 75%. So I agree with the TPA that B&C don't form a controlled group, at least based upon only the information you have given, which assumes there's no additional attribution from stock options or whatever.

Now, you MIGHT still have an affiliated service group, which is very dependent upon the facts and circumstances. So someone should take the extra step, and ask the client if their attorney has also reviewed this for ASG status.