Joint Venture Question

[Guest San Diego Benefits Guy]

Individual A and Company B are unrelated and each maintains its own retirement plan. Individual A and Company B will participate in a joint venture where each joint venturer will own 50% of the joint venture. Can Individual A and Company B continue to maintain their own retirement plans without taking into account the employees of the joint venture? These businesses are totally unrelated. Think of Individual A and Company B making widgets and lawn furniture, respectively, and the joint venture selling pizzas. This would also not constitute an affiliated service group. I think Individual A and Company B would be ok. Thanks for your thoughts. Ed

[Lou S.]

No controlled group issue if that's what you are asking. And since your ruled out ASG doesn't sound like any problem to me.

[Lou S.]

If the joint venture also has a plan make sure you don't run afoul of §415 which has a lower theshold, 50% (instead of 80%) if I recall correctly but I don't remember if it is = 50% or >50%.

[jpod]

Unusual for a joint venture to have its own employees, because there is no "entity" that is created to undertake the venture; typically the employees of the two joint venturers perform the work necessitated by the joint venture. Do you mean "joint venture" in a technical sense, or have they actually created an entity that will have employees?

[Guest emcelroy]

jpod, the actually created an entity that will hire its own employees. I suspect now that the ugly ASG rules will kick in. Individual A's wife owns a small company that has 7 employees and is in the IT business. Company B has one employee and is in the advertising business. The new entity is in the food service business. It appears that Individual A and Company B will provide management services since they are the only two owners in the new entity. Can they pay someone to serve as manager of the new entity LLC. I know this is a lot of work. Probably not too much downside if plan covers employees of LLC new entity and utilizes a 6-year graded vesting schedule. Most employees will not stick around. Thanks in advance for your comments.