Certain Employers Should Not Have Been Part of Controlled Group

[JH1]

A new client has been operating plans from many different companies as a controlled group from 2011 to the present. There was not enough common ownership amongst the companies to qualify as a controlled group. The plan assets are being held in a master trust. I've been searching for the required correction and cannot seemed to find answers.

1. What is the correction for improperly classifying the plans as a controlled group?

2. Because these plans are not a controlled group, it seems they should not have been held in a master trust. Is there an IRS or DOL correction for this? Can the trust document simply be amended to a group trust instead of a master trust?

Any help is greatly appreciated.

[Kevin C]

First of all, is there any chance all the companies are part of an affiliated service group?

When non-related companies sponsor the same plan, you have a multiple employer plan. The first thing to look at is the plan document. Prototypes can't be used for multiple employer plans. Volume submitter documents can. Does the document used have multiple employer language? If it has an adoption agreement, does the way it was filled out prevent the multiple employer rules from applying? You may or may not need a plan document correction.

With a multiple employer plan, some testing (for example ADP/ACP testing) is done at the employer level. Other rules (for example 415 limits) apply at the plan level. Would all of the testing pass if it is done at the appropriate level? If not, that will need to be corrected.

If the plan and trust documents have multiple employer provisions, I wouldn't expect any corrections to be needed there. But, without seeing the trust document, it's impossible to tell.

I would also suggest getting an ERISA attorney involved.