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Question 47: Individual X owns 100% of Corp A and is an employee of that corporation. Corp A owns 50% of the stock of Corp B. Corp C owns the other 50% of the stock of Corp B. Corp A, Corp B and Corp C constitute an affiliated service group. Corp B sponsors a qualified retirement plan that covers the employees of all three corporations, including individual X. Individual X also earns self-employment income that is unrelated to the three corporations. Can X's sole proprietorship sponsor a qualified plan for X's self-employment income? |
Answer: Yes, but ... So sole proprietor X can sponsor a plan but has to take the other organizations into account in testing for compliance with Code Section 410's minimum participation requirements, and the various other Code rules. |
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.
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