Affiliated Service Groups/Controlled Groups/Attribution

[Guest akscher]

This is outside my practice expertise.

Doctor owns 100% of an S-corporation. Doctor is an HCE with respect to the S-corporation, his salary averages about $400,000 per year. S-corporation provides medical services (dermatology) to patients. S-corporation has a 401(k) plan. S-corporation has additional employees.

Doctor's spouse owns 100% of an LLC. LLC is taxed as a sole proprietorship. LLC is engaged in the business of providing clinical trial studies to independent, unrelated, third party drug companies. The LLC hires the Doctor as an independent contractor to perform the study. The LLC has no employees and the spouse will have self-employment income equal to the LLC's profit.

Spouse is not an employee or officer of the S-corporation, and the Doctor is not an employee or officer of the LLC.

Spouse desires to have a solo 401(k).

The S-corp and the LLC do not provide services to each other, but the LLC does provide services typically performed by dermatologists (clinical trials).

Does this structure work under the affiliated service group or controlled group rules, including the relevent attributions rules?

Thanks in advance for any guidance.

-Alan S.

[rcline46]

Who's The Employer by Derrin Watson. Review his articles on the Benefitslink home page. Attribution rules for controlled groups. These situations are common in qualified plans so it is worth your study.

[PensionPro]

This chart might help, the answer may be fairly easy to figure out.

http://employerbook.hypermart.net/SampleChart.html

[masteff]

An informative prior discussion:

http://benefitslink.com/boards/index.php?showtopic=39019