Affiliated Service Group/Controlled Group

[Randy Watson]

Could the controlled group and affiliated service group rules be combined to create a group of related entities? For example, would a subsidiary in a parent/subsidiary controlled group be part the affiliated service group to which the parent company belongs (even if the subsidiary does not perform or receive any services from the ASG?)

[Jim Chad]

FWIW I think yes. A wholly owned subsidiary would be part of any affiliated service group the parent is in.

[justatester]

I was just about to post a question about this same topic...so here goes my question...

Company A is owned by two brothers 50% each.

Company B is owned by one brother 100%

Company C is owned by the other brother 100%

Plan A consists of Company A and Company B as a participanting employer. I am assuming the 2 brothers would be considered HCEs based on Ownership. No other HCEs based on comp limit. BTW, Plan A is Safe Harbor as of 1-1-09.

Plan B consists only of Company C employees. No other participanting employers. Plan B is NOT Safe Harbor.

We have received direction from the client to test Company A's employees in both Plan A and Plan B. They do this beacause company A performs payroll, billing, bookkeeping, accounting, etc services for both Company B & C. In the past neither brother contributed to either plan therefore since they were the only potential HCEs. Plans passed ADP testing.

Since Plan A is now Safe Harbor, both brothers put in $16,500. If I am required to test Company A ees in Plan B, since they are the only HCEs, the plan fails miserably. HCE Average = 20% NHCE Average is 2.5%. The brother ony earn about $80,000.

Does it make sense to test only Company A's employees in both Plans? Should we be treating these plans as a controlled group?

Just not sure what to do...any help would be greatly appreciated!