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

Pension Administrator

MGKS
(Remote / Phoenix AZ)

MGKS logo

DC Administrator

United Benefit Pensions Inc.
(Remote / Melville NY)

United Benefit Pensions Inc. logo

Manager - Defined Contribution Plans

M2B Retirement Consulting LLC
(Remote / Wexford PA)

M2B Retirement Consulting LLC logo

Plan Administrator Consultant

Jocelyn Pension Consulting
(Remote / Boulder CO)

Jocelyn Pension Consulting logo

Director of Pension Administration

Primark Benefits
(Remote / San Mateo CA)

Primark Benefits logo

Compliance Specialist II

EPIC RPS
(Remote)

EPIC RPS logo

401(k) Retirement Plan Administrator

Midwest TPA with Remote Workforce
(Remote / Beachwood OH)

Compliance Analyst - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Ubiquity Retirement + Savings logo

Retirement Plan Administrator

CMC Pension Professionals
(Remote)

CMC Pension Professionals logo

Chief Pension Actuary

Loren D. Stark Company
(Remote)

Loren D. Stark Company logo

Retirement Plan Administrator

Hicks Pension Services
(Remote)

Hicks Pension Services logo

Benefits Supervisor

NFL Player Benefit Office
(Baltimore MD)

NFL Player Benefit Office logo

Plan Administrator

Aimpoint Pension
(Remote / Pompano Beach FL)

Aimpoint Pension logo

DB/DC Administrator

Primark Benefits
(Remote / San Mateo CA)

Primark Benefits logo

Retirement Plan Relationship Manager – DB or DC Focus

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

Trinity Pension Consultants logo

Retirement Plan Administrator

Hessel & Associates, LLC
(Remote / IL)

Hessel & Associates, LLC logo

Senior Defined Contribution Account Manager

Nova 401(k) Associates
(Remote)

Nova 401(k) Associates logo

Enrolled Actuary

Loren D. Stark Company
(Remote)

Loren D. Stark Company logo

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Retirement Plan Administrator

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

Nicholas Pension Consultants logo

Junior Implementation Specialist - 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

Management function group and controlled group

(Posted March 16, 1999)

Question 16: The principal business of A is performing, on a regular and continuous basis, management functions for B and C. B is not related (as used in 414(m)(5)) to A or C, but C is a wholly owned subsidiary of A. A does not have any other significant source of revenue, and does more work for (and receives more income from) B than it does from C. Are A and C members of a "management" affiliated service group under 414(m)(5)?

Answer: No, but A and C are a parent-subsidiary controlled group under 414(b), or a group of trades or businesses under common control under 414(c). If you are dealing with a wholly owned entity, that is the case.

Now, A and B are a management function group under 414(m)(5). The manager of a management function group must have as its principal business purpose providing management functions for 1 other entity (or for 1 entity and businesses related to that entity). Whether measured by time or revenue, in this case it appears that this 1 entity is B. However, C is not related to B, and is technically not part of the management function group.

So, here you have A in a controlled group with C and in an ASG with B. All employees of A and C are deemed to be employed by a single employer for most plan purposes (as defined in 414(b) and (c)), and all employees of A and B are deemed to be employed by a single employer for most plan purposes (as defined in 414(m)).

What are the differences? Well, for one thing, A and C could be broken apart for testing under the Qualified SLOB rules (there's no SLOB like a Qualified SLOB), but A and B cannot. For another, if all three jointly sponsor a plan, A and C can compute a single deduction limit, while B would have its own separately computed limit (assuming the plan was adopted after 1988).

One interesting question arises as to whether the three are treated as a single entity for purposes of 410 and 401(a)(4). I say yes. If A=B and A=C, then A=B=C. Dick Wickersham and Jim Holland disagree, thinking that you must test separately for the group of A and B and then test for the group of A and C.

Management function groups, and other affiliated service groups, are discussed at length 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.