Affiliated Service Group and 5% owner determination

[Trekker]

We have Company A (Plan Sponsor and Employer) and Company B (a participating employer). Both make up an Affiliated Service Group.

Company B has zero ownership in Company A, but Company B is owned 100% by an individual who is participating in the Plan. This individual does not earn enough to be an HCE based on comp, but is he a 5% owner for plan purposes (HCE and Key Employee determination)?

Reg. 1.414(q)-1T, Q&A-8 seems to say, yes, the individual is considered a 5% owner. But there is just enough ambiguity in the regs to make me doubt myself.

Can someone confirm?

Thanks.

[Guest Spock]

I completed the ASPPA CPC module on Related Groups in 1Q 2010 and the information in the material states that, when an ASG exists, the Plan is treated as sponosred by a single employer for purposes of HCE determination under 141(q). If you send me an e-mail I will share the pages from the mateial for you to review.

LL&P.

S

We have Company A (Plan Sponsor and Employer) and Company B (a participating employer). Both make up an Affiliated Service Group.

Company B has zero ownership in Company A, but Company B is owned 100% by an individual who is participating in the Plan. This individual does not earn enough to be an HCE based on comp, but is he a 5% owner for plan purposes (HCE and Key Employee determination)?

Reg. 1.414(q)-1T, Q&A-8 seems to say, yes, the individual is considered a 5% owner. But there is just enough ambiguity in the regs to make me doubt myself.

Can someone confirm?

Thanks.

[Trekker]

Thank you, Spock. I sent you an e-mail.

Live long and...well, you know.