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

Product Support Consultant

ftwilliam.com part of Wolters Kluwer Legal & Regulatory
(Telecommute)

ftwilliam.com part of Wolters Kluwer Legal & Regulatory logo

DB Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

DC Administrator

MGKS
(Telecommute / Phoenix AZ)

MGKS 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

Employee Benefits/Health and Welfare Attorney

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

Miller Johnson logo

Defined Benefit Retirement Plan Administrator

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

Benefit Associates, Inc. logo

Retirement Plan Administrator

Premier Plan Consultants
(Telecommute / San Diego CA)

Premier Plan Consultants logo

DC 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)

Manager, 5500 Team

401K Generation
(Altamonte Springs FL)

401K Generation logo

DB/DC Administrator

Primark Benefits
(Telecommute / Burlingame CA)

Primark Benefits 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

Equipment Leases and Affiliated Service Groups

(Posted February 12, 2001)

Question 77: We have Corporation AB, which is owned 50% by A and 50% by B, who are two unrelated individuals. Corporation AB maintains a profit sharing plan. A and B wish to form Corporation ABC, which will be owned 40% by A, 39% by B and 21% by C. C is unrelated to A and B. Corporation ABC will lease equipment solely to Corporation AB (no other customers). Must Corporation ABC's employees be covered by Corporation AB's profit sharing plan? (If this is not a controlled group, is it an affiliated service group?)

Answer: True, they aren't a controlled group (assuming the absence of options to buy, rights of first refusal, and other issues that would give rise to attribution or exclusion); 79% is not 80%. 79.9995% is not 80%. Anything less than 80% is not enough to create a controlled group.

The first question to ask in dealing with affiliated service group questions is, What organizations can be service organizations? You haven't told us about Corporation AB, but Corporation ABC is not likely to be a service organization. If it's making serious money by leasing equipment, then capital is a material income-producing factor. If Corporation AB is not in the fields of health, law, engineering, accounting, etc., then it's not a service organization.

As such, ABC cannot be a First Service Organization or an A-Org. It could be a B-Org only if it provided significant employee services. It could be part of a management function group only if one business or the other had as its principal business purpose the provision of management functions to the other. Based on the limited facts in the question, you do not have an affiliated service group.


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 BenefitsLink.com, Inc.