Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

Site Manager / Senior Administrator

Nicholas Pension Consultants
(Remote / AZ / ID / NM / NV / UT)

Nicholas Pension Consultants logo

Benefits Supervisor

NFL Player Benefit Office
(Baltimore MD)

NFL Player Benefit Office logo

Compliance Specialist II

EPIC RPS
(Remote)

EPIC RPS logo

Retirement Plan Relationship Manager – DB or DC Focus

Trinity Pension Consultants
(Remote / Akron OH / AL / IN / KY / MO / TN)

Trinity Pension Consultants logo

DC Administrator

United Benefit Pensions Inc.
(Remote / Melville NY)

United Benefit Pensions Inc. logo

Junior Implementation Specialist - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Ubiquity Retirement + Savings logo

Chief Pension Actuary

Loren D. Stark Company
(Remote)

Loren D. Stark Company logo

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Pension Administrator

MGKS
(Remote / Phoenix AZ)

MGKS logo

Senior Defined Contribution Account Manager

Nova 401(k) Associates
(Remote)

Nova 401(k) Associates logo

Plan Administrator Consultant

Jocelyn Pension Consulting
(Remote / Boulder CO)

Jocelyn Pension Consulting logo

Manager - Defined Contribution Plans

M2B Retirement Consulting LLC
(Remote / Wexford PA)

M2B Retirement Consulting LLC logo

Retirement Plan Administrator

CMC Pension Professionals
(Remote)

CMC Pension Professionals logo

Retirement Plan Administrator

Nicholas Pension Consultants
(Remote / Rancho Cordova CA / Corona CA)

Nicholas Pension Consultants logo

Plan Administrator

Aimpoint Pension
(Remote / Pompano Beach FL)

Aimpoint Pension logo

401(k) Retirement Plan Administrator

Midwest TPA with Remote Workforce
(Remote / Beachwood OH)

Retirement Plan Administrator

Hessel & Associates, LLC
(Remote / IL)

Hessel & Associates, LLC logo

Retirement Plan Administrator

Hicks Pension Services
(Remote)

Hicks Pension Services logo

Enrolled Actuary

Loren D. Stark Company
(Remote)

Loren D. Stark Company logo

Compliance Analyst - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Ubiquity Retirement + Savings logo

View More Employee Benefits Jobs

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Merged Business Can Be Separate From Earlier Businesses

(Posted September 11, 2001)

Question 127: Corp 1 is owned by doctors A and B. Corp 2 is owned by doctor C. Each corporation has a retirement plan. The two corporations will continue to exist through the end of the year and collect receivables. The doctors are starting a third company (Corp 3) to be the "operating corporation" going forward, with the three doctors as equal shareholders. All employees will be retained with the same job titles and positions. Is Corp 3 aggregated with the others? All three doctors are unrelated.

Answer: That's uncertain based on the facts given.

They certainly are not a controlled group, assuming that there are no facts giving rise to attribution or exclusion. A and B own 100% of Corp 1, but only 67% of Corp 3-- not enough for a controlled group.

The minimum required ownership does exist for an affiliated service group. But the real question is whether one corporation provides services to the others, or if they are related in providing services to third parties. The old corporations continue for the purpose of collecting receivables. I don't know about your business, but my receivables don't collect themselves. You need to send bills, deal with insurance companies, take the money to the bank, credit accounts, etc. And all of that implies employees who are performing those services. And those employees are going to come from Corp 3.

Is that enough to create an affiliated service group? We don't know. It depends on whether this represents "regularly providing services." This requires a close look at the actual facts of the situation, and may be a situation calling for a determination letter from the IRS.

On the other hand, if you leave skeleton staff at the old businesses to process things, paid from the old businesses rather than from Corp 3, then it becomes very difficult to argue that Corp 3 is regularly providing services to the other two corporations or that they are regularly associated in providing services to third parties.

These issues are discussed in more detail in Chapter 13 of my book, Who's the Employer?.


Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2022 BenefitsLink.com, Inc.