Controlled Group/Affiliated Service Group

[Chippy]

I have a doctor group. Company A has 41 doctors/owners participating, all owning equal shares. 19 doctors own company B and the other 22 own company C. Company B and C's plans are for the employees of the imaging centers the drs. own.

It has been determined that this is an Affiliated Service Group, not a controlled group.

****They want to continue to have three separate plans but have the assets combined in one. Is this allowed? The trustee/custodian would have to split the assets by company to complete the individual 5500s.

[Mike Preston]

Perfectly allowable as long as the authorizing Trust document allows. RTFD (read the fantastic document).

[Tom Poje]

you do raise a possible valid point of concern. see comments below, years ago (oh good grief many many moons ago)a question arose about avoid a large plan audit by splitting a 'plan' into more than one - probably tough to prove - and you didn't indicate if this was even an issue (how many other employees there are). (in this case you noted the assets are all combined (or possibly they are separate and they want to combine them) If combined, arguably it almost smells like in reality one plan) [i am simply posting a note an not expressing an opinion one way or the other)

..................................

at the 2000 annual ASPPA meeting, in the general Q&A session. The questions at this session were answered by Joe Canary, Scott Albert, Lou Campagna and Mabel Capolongo of the Department of Labor:

Question 5: A 401(k) plan has 150 participants. The plan must file a full 5500 and have an audit by an accounting firm. Due to the cost of the audit ($10,000 or $15,000), my suggestion to the client is to split the plan into two plans, each with 75 participants. For 2000 there will be an audit. The plans could be split into two plans on December 31, 2000. Therefore, on January 1, 2001, both plans have less than 100 participants and no audit required. For tax qualification testing, they can be permissively aggregated. In fact, my plan is to administer as if it was one plan and just separate for 5500 purposes. Is my conclusion correct?

Answer: This question raises issues of avoidance and evasion. It is not certain that you really have two plans for purposes of Title I of ERISA in this instance--even if there may be two plans for Internal Revenue Code purposes. In Advisory Opinion 84-35A, the Department stated it would consider, among others, the following factors in determining whether there is a single plan or several plans in existence: who established and maintains the plans, the process and purposes of plan formation, the rights and privileges of plan participants and the presence of any risk pooling, i.e., whether the assets of one plan are available to pay benefits to participants of the other plan. This Advisory Opinion also notes that the Internal Revenue Service has cited the existence or absence of risk pooling between funds as relevant to the determination of single plan status. See §1.414(1)-1(b) 26 C.F.R. §1.414(1)-1(b). In DOL Advisory Opinion 96-16A, the Department stated its position that whether there is a single plan or multiple plans is an inherently factual question on which the Department ordinarily will not opine in the Advisory Opinion process.

[Chippy]

Thank you. Company A with the physicians is already a large plan. company B & C each have less than 50 participants. So they aren't trying to avoid an audit. The doctors just joined practices earlier this year, so nothing has happened yet. I'm not sure why they want three plans, but only one trust? still in discussion.