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)

Benefits Supervisor

NFL Player Benefit Office
(Baltimore MD)

Compliance Specialist II

EPIC RPS
(Remote)

Retirement Plan Relationship Manager â DB or DC Focus

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

DC Administrator

United Benefit Pensions Inc.
(Remote / Melville NY)

Junior Implementation Specialist - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Chief Pension Actuary

Loren D. Stark Company
(Remote)

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Pension Administrator

MGKS
(Remote / Phoenix AZ)

Senior Defined Contribution Account Manager

Nova 401(k) Associates
(Remote)

Plan Administrator Consultant

Jocelyn Pension Consulting
(Remote / Boulder CO)

Manager - Defined Contribution Plans

M2B Retirement Consulting LLC
(Remote / Wexford PA)

Retirement Plan Administrator

CMC Pension Professionals
(Remote)

Retirement Plan Administrator

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

Plan Administrator

Aimpoint Pension
(Remote / Pompano Beach FL)

401(k) Retirement Plan Administrator

Midwest TPA with Remote Workforce
(Remote / Beachwood OH)

Retirement Plan Administrator

Hessel & Associates, LLC
(Remote / IL)

Retirement Plan Administrator

Hicks Pension Services
(Remote)

Enrolled Actuary

Loren D. Stark Company
(Remote)

Compliance Analyst - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

View More Employee Benefits Jobs

Free Newsletters

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

-- An attorney subscriber

BenefitsLink > Q&A Columns >

Who's the Employer?

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

LLC Member as Employer

(Posted December 6, 2000)

Question 65: An LLC taxed as a partnership has four owners, three of whom are medical corporations and one is an individual doctor. The three corporations and the partnership are an affiliated service group. The LLC has one rank-and-file employee, who participates in a 25% money purchase pension plan. That plan excludes doctors from participating. The individual doctor owner would like a plan. Can he set one up?

Answer: Directly, no, but he does have options.

The doctor is a "self-employed individual" because he has earned income from the LLC. Under IRC 401(c), the LLC is deemed to be his employer. He is not deemed to be his own employer. Rather, his LLC is. This means that if he sets up his own plan, it would be disqualified for failure to satisfy the exclusive benefit rule. These issues are discussed at great length in Chapter 1 of the second edition of my book, Who's the Employer?.

What can the doctor do? Here are a couple of possibilities:

Incorporate. Then, the corporation can set up a plan covering the doctor.
Have the LLC set up a defined contribution plan covering the doctor.

Again, the modification of IRC 401(a)(26) so it does not apply to defined contribution plans allows you to have these multiple plans in an affiliated service group situation.

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.