Subscribe Now!
Free Daily News, Jobs, Webcasts, Discussions
Post and Distribute
Your Jobs
ARPA Webcasts

Featured Jobs

Director of 401(k) Implementation, Core

Human Interest
(Telecommute / Mill Valley CA)

Human Interest logo

401(k) Consultant

TPS Group
(Telecommute / North Haven CT)

TPS Group logo

401(k) Implementation Manager

Human Interest
(Telecommute / San Francisco CA)

Human Interest logo

Retirement Plan Consultant / Relationship Manager

Associated Pension Consultants
(Chico CA / Sacramento CA)

Associated Pension Consultants logo

Manager, 5500 Team

401K Generation
(Altamonte Springs FL)

401K Generation logo

DB/DC Administrator

Primark Benefits
(Telecommute / Burlingame CA)

Primark Benefits logo

DC Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

Defined Benefit Retirement Plan Administrator

Benefit Associates, Inc.
(Telecommute / Huntington Beach CA)

Benefit Associates, Inc. logo

Employee Benefits/Health and Welfare Attorney

Miller Johnson
(Telecommute / Grand Rapids MI / Kalamazoo MI / Detroit MI)

Miller Johnson logo

Product Support Consultant part of Wolters Kluwer Legal & Regulatory
(Telecommute) part of Wolters Kluwer Legal & Regulatory logo

Retirement Plan Administrator

Premier Plan Consultants
(Telecommute / San Diego CA)

Premier Plan Consultants logo

DB Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

Director of Finance

NYCDC of Carpenters Benefit Funds
(New York NY)

DC Administrator

(Telecommute / Phoenix AZ)

MGKS logo

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

What Is a Management Function?

(Posted July 19, 2002)

Question 216: What is a "management function" for purposes of Code Section 414(m)(5)? Specifically, if a leasing company derives 50% of its revenues from providing back room service staff (billing and accounting and other non-medical staff) to a medical practice, are these considered "management functions"? There is absolutely no common ownership between any of the entities.

Answer: Ah, life's great questions. Where did I come from? Why am I here? What happens after this life? What is a management function?

For the first three questions, you search your soul, or you study the Bible, or you read the words of philosophers and poets. And still the questions come.

For some reason, for the fourth question we go to the IRS and expect an answer. But answer came there none. The IRS once tried to define a management function. That definition went beyond the mark, and relied on authority from IRC 414(o) to validate it. The IRS withdrew the definition, and has not issued any guidance on the subject.

So, what is a management function? Look at the English meaning of the words. It's what a manager does. He or she hires, fires, supervises, sets policies, determines directions, gets stock options, and cooks the books (in some companies, at least).

Is performing the kind of back office ministerial functions that you describe considered "managing"? Not as far as I can see.

Incidentally, in a close case you can get a determination letter from the IRS on whether an affiliated service group (including a management function group) exists. You request it on a Form 5300. Apparently, the IRS is like the Supreme Court justice, who wrote that he didn't know what pornography was, but he knew it when he saw it (and as a member of the high court in the 60s and 70s, he saw a lot of it - "What did you do at work today, dear?" "Oh, just watched some more blue movies with 8 other old guys.") The IRS can't tell us what a management function is, but I guess they know it when they see it.

For more on management function groups, read Chapter 13 of my book, Who's the Employer. For more on life's other great questions, start with John 3:16 and go from there.

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)

© 2021, Inc.