ASG / A-Org

[JPIngold]

Does anyone have a good way to explain the terms "service organization" and "regularly associated with an FSO in providing services to third parties" to someone who just doesn't want to believe an ASG exists???

I have a physician client (yea, surprise surprise) who decided to sell his "practice" to an organization who will take all of his employees off of his hands, leaving just the physician in his "practice". I inquired as to whether the organization was a service organization and if the physician and the organization will work together to provide health services to patients and the answer given was "_________ (the organization) does not provide healthcare services, but rather administrative and support services to the doctors".

Well, if the employees that were moved to the organization include nurses who will draw blood, insert IV's, etc., how is that NOT considered providing a healthcare service???

I guess I am looking for the Sesame Street version of explaining an A-Org ASG.

 

[ETA Consulting LLC]

There were some old 'shared employee' Regulations that dealt with this many many years ago.  I would doubt they are still enforced, but don't know. 

In your situation, your ASG determination may likely result in a "NO" because there would likely be no shared ownership (either a partner or shareholder) of the FSO.  

As long as I've been in the industry, it has seemed as if this issue was based solely on determining whether a Controlled Group, ASG, or Management Group existed in order to determine whether a doctor was required to cover employees who were common law employees of another organization.  The old shared employee rules used to deal with this exact issue.  It would certainly help if the IRS were to address this (at least to let us know of the Shared Employee Regulations are still in play).

Good Luck!

[JPIngold]

Sorry, I meant to include that in my facts .... the physician-owner of the practice will receive a "unit" of ownership in the "organization", so although small, he will have an ownership interest.

I just can't see how this isn't an ASG and, unfortunately, I can't tell them to get a determination letter anymore. I am going to insist on a legal opinion or find another TPA.

[Tom Poje]

smells like a system to get around covering folks under qualified plans.

sounds like such employees are for all practical purposes leased employees

 

Under Code section 414(n), a leased employee is defined as a person who provides services:

1. To a recipient company pursuant to an agreement between the recipient company and the leasing organization,
2. On a substantially full-time basis, and
3. Under the primary direction or control of the recipient company.

https://www.irs.gov/retirement-plans/employee-plans-compliance-unit-epcu-leased-employees

[ETA Consulting LLC]

5 hours ago, JPIngold said:

Sorry, I meant to include that in my facts .... the physician-owner of the practice will receive a "unit" of ownership in the "organization", so although small, he will have an ownership interest.

I just can't see how this isn't an ASG and, unfortunately, I can't tell them to get a determination letter anymore. I am going to insist on a legal opinion or find another TPA.

 

 

Well, it gets interestinger and interestinger from here.  Given that there is some 'shared ownership' where one company owns some part of the other, then the analysis can begin. You know that the Physician's Practice can easily qualify as an FSO, but since the Administrative Organization does not own any portion of the physician's practice, they won't be an A-Org on that line. 
However, if you know look at whether the Administrative Organization is the FSO (which becomes debatable) AND does the physician have ownership in the FSO (which he does), and is the physician regularly associated with the FSO in performing services for a third persons (which they do), then you can see where you would have to clearly establish that the Administrative Organization is a FSO for A-Org purposes by determining whether it is either:
and unincorporated service organization or a Professional Service Corporation (which is where to get your fields of specialty). 
So, you may see where these may or may not be an A-Org.  You would, then go to your B-Org analysis.  

I guess it's easy to sum this up in a statement "Details are important".  This is usually why attorneys charge the dollars to ensure they've ascertained all the facts necessary in performing the analysis necessary to determine ASG status.  You may always file with the IRS to have them make the determination for you.  

Good Luck!

[ETA Consulting LLC]

19 hours ago, JPIngold said:

(the organization) does not provide healthcare services, but rather administrative and support services to the doctors".

Well, if the employees that were moved to the organization include nurses who will draw blood, insert IV's, etc., how is that NOT considered providing a healthcare service???

 

And there you have it.  I agree with you!  I just had to go through the 'details' to get where you are.

Good Luck!

[PAiPal]

This may be an B-Org situation.  You said this other organization is providing "administrative and support services to the doctors".    If a significant portion  (generally 10% or more)  of this organization's income is from performing services for the doctor (the FSO) of type historically performed by employees, you would have an B-Org ASG. 

Sorry I posted this before ETA's comment on B-Org.

[LANDO]

These are exactly the situations the ASG rules were meant to address!  So here's the deal Doc...we'll set up a company to employ all your staff, then you just pay us for their services.  That way you won't have to worry about covering them under your benefit programs. Pretty sweet right?  If it doesn't smell right, keep digging.

[ETA Consulting LLC]

5 hours ago, LANDO said:

These are exactly the situations the ASG rules were meant to address!  So here's the deal Doc...we'll set up a company to employ all your staff, then you just pay us for their services.  That way you won't have to worry about covering them under your benefit programs. Pretty sweet right?  If it doesn't smell right, keep digging.

But along those same lines, if I set up a company and provide services to 100 different organizations and each organization provides 1% of my revenue, then you can see where the ASG rules would prevent it from being defined as an ASG.  I usually apply the 'smell' test to areas where determinations must be made based on facts and circumstances.  Alternatively, when there is a clearly defined "IF-THEN", I will ensure I compare each detail to that standard.  Often, the most difficult part is obtaining all the facts necessary in making the determination.  Actually making the determination (after all facts are gathered) is actually pretty easy in many instances.

I agree with you.  So, there's no argument here.  It's just that over my career, I've lost tons of arguments using a broad brush smell test :-)  So, I would typically gather as many details as possible and state my conclusion based on those details (and try to make it clear that the conclusion could easily be different should the fact pattern change).

But, if it doesn't smell right, I do ask for more details.  AND, when I get in over my head, recommend the client obtain the services of a Derrin Watson 

Good Luck!  

[Christine Roberts]

I work with doctor and dentist groups frequently and have had success boiling these concepts down into terms they can understand and act on with assurance.