Controlled Group Question

[Guest Williamj1]

Hey all,

Long time lurker and first time poster on the forum! I am hoping for some help with the following question about controlled group status. I believe I know the answer but I want to double check before submission to legal counsel for confirmation.

Do the following companies pass the controlled group testing requirements?

MW

RW*

WCDC

Husband

32.50%

50.00%

20.00%

Wife

16.00%

0.00%

20.00%

Sister

32.50%

50.00%

20.00%

Other1

10.00%

0.00%

20.00%

Other2

0.00%

0.00%

20.00%

*RW wholly owns another company - TR

My conclusions are the following:

1.) MW and RW are a controlled group

2.) MW and WCDC are a controlled group

3.) RW and WCDC are not a controlled group

4.) TR is part of the MW and RW controlled group

Client would like all companies covered under a single plan.

What are your thoughts about the controlled group status and the plan issues with attemting to cover the companies under a single plan?

Thanks!!!

[Guest Williamj1]

Sorry the ownership got wacky!

MW is husband 32.5%, wife 16%, sister 32.5%, other 1 10%, other 2 0%

RW is husband 50%, wife 0%, sister 50%, other 1 0%, other 2 0%

MCDC husband 20%, wife 20%, sister 20%, other 1 20%, other 2 20%

[Lou S.]

MW & RW = 81% common ownership (co), 81% identical ownership (io) = brother sister (bs) CG

MW & MCDC = 100% co, 70% io = bscg

RW & MCDC = 60% co, 60% io <> bscg

At least that's what I come up with, if I've screwed something up someone can correct me.

[My 2 cents]

Not claiming to be an expert on this, but unless the parents of husband and sister are involved in the ownership, wouldn't there be no attribution of ownership to or from a sibling? Isn't attribution limited to direct descent (grandparents-parents-children), with no branching off to siblings, aunts or uncles, nephews or nieces etc.? So (if I understand the ownership and company names correctly) attribution of MW ownership might be as high as 48.5% to the husband and wife with the other 52.5% ownership being considered unrelated. RW is owned 50% by husband, 50% by sister and there would be no attribution to either of the other's ownership - they would be considered independently. MCDC would be at most 40% husband and wife, with the sister and two others owning 60% between them, with no attribution from the husband and wife to the sister or vice versa.

If this is wrong, I stand ready to be corrected.

[Lou S.]

My 2 cents - for Brother-Sister controlled group it is 5 or fewer owners with at least 80% common ownership and more than 50% identical ownership.

Yes the sister is separate but husband and wife can be thought of as one.

Getting back to the OPs question, yes I think you can have one plan but I think you may need to run multiple non-discrimination tests on the groups that are controlled and the groups that are not controlled.

[Calavera]

Who owns the missing 9% of MW?

[Guest Williamj1]

Sorry, missing 9% is a 5th owner without any other ownership in the other companies.

[Calavera]

I assume you meant 6th owner. Then I agree with Lou S. with minor correction that doesn't change the controlled group determination - MW & MCDC = 80% co, 70% io = bscg. Therefore they can have a single employer plan for MW/RW/TR, but they can not have a single-employer plan for all 4 companies .

I believe they may have a multiple employers plan, but I am not familiar with this type of plans.

[CFP]

I have the same question, and am struggling to understand. I have this for an ownership structure. No parties are related.

Company A Company B Common

John 55% 54% 54%

Bill 45% 0% 0%

Mike 0% 34% 0%

Total ownership 100% 88% 54%

Do I have a controlled group?

[Tom Poje]

years ago 'chicken little' got hit in the head with the following.

I thought the sky was falling but when I woke up the following file was lying next to me.

maybe it will help. not sure where it originated from but what the heck.

controlledgroup.xls

[Belgarath]

I think that is TAG's spreadsheet. P.S. - note how your result will change if you change ownership ever so slightly to give Mike 1% in Company A, and Bill 1% in Company B.