Affliated Service Group?

[Spencer]

I have a prospective client that wants to do one plan for two employers. There is common ownership, but it is not a controlled group.

ABC is an engineering firm.

XYZ is a mechanical, electrical and plumbing contractor.

ABC provides traditional engineering services for XYZ and XYZ provides design for constructability and budgeting services for ABC (in addition to selling work for ABC).

Any thoughts are whether this is an Affiliated Service Group?

[J Simmons]

From the info you have provided, if ABC and XYZ are not already an ASG, they could easily, with little adjustment to ownership and operations become one, so that you'd not have issues of multiple employer plan and be able to perform minimum coverage and nondiscrimination testing as if one employer (which might be an aim of them jointly having a plan rather than each their own separate plan).

ABC is a service organization, so it is possible that it and XYZ are an B-Org (414(m)(2)(B)), but only if 10% or more of XYZ is owned by ABC or its HCEs, and in the industry of mechanical, electrical and plumbing contracts in late 1981, the engineering services were of a type performed by employees of the mechanical, electrical and plumbing contractors.

If XYZ is thinly capitalized to the point that capital is not a material income producing factor, then there might be an A-Org (414(m)(2)(A)) if ABC owns part of XYZ since ABC regularly performs engineering services for XYZ.

[Spencer]

Thanks!! HCEs of ABC do own more than 10% of XYZ.