for profit wholly owned subsidiary of not for profit

[R. Butler]

for profit hospital is a wholly owned subsidiary of a non-profit health system. Employees transfer employment from the subsidiary to the parent. On its face it seems to me that this is a controlled group and as such no severance of employment entitling the participants to distributions. Am I missing something?

Any cites and guidance will be appreciated.

[ETA Consulting LLC]

for profit hospital is a wholly owned subsidiary of a non-profit health system. Employees transfer employment from the subsidiary to the parent. On its face it seems to me that this is a controlled group and as such no severance of employment entitling the participants to distributions. Am I missing something?

Any cites and guidance will be appreciated.

If the hospital is 100% owned by the health system, then the hospital, itself, should be considered as a Controlled Group for purposes of any Qualified Plans.

However, the hospital, since it is not a charitable non-profit (under 501©(3)), it would not be eligible to participate in any 403(b) plan sponsored by the health system.

The 410(b) rules, however, would appear to apply for "Non-elective or matching contributions".

Note of caution: I'm aware that controlled group rules for non-profits are determined base the percentage of the board members that are shared by the non-profits as there is no ownership. I don't think this rule applies here because you are looking at an organization here is the 'actually owned' by the non-profit. I would urge to consider this when attempting to solidify your determination (I just didn't take time to revisit the rule, "Yet").

Good Luck!