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

414(m) Proposed Regs Withdrawn?

(Posted March 21, 2001)

Question 88: In Q&A-87, you referenced the proposed regulations under 414(m), dealing with affiliated service groups. Weren't those regulations withdrawn?

Answer: Good question. The point is frequently misunderstood, because there were two sets of proposed regulations dealing with 414(m). The second set was withdrawn, but the first set wasn't.

The first set of proposed regulations was issued February 28, 1983. It's appropriate that we talk about them because they just celebrated their 18th birthday and are now old enough to vote, even though they are still only proposed.

Those regulations set forth the ground rules for dealing with traditional (A-Org and B-Org type) affiliated service groups. They give us the professional corporation exemption (it probably should be called the nonprofessional corporation exemption, because it says corporations that are not professional service corporations cannot be FSO's in applying the A-Org test). They also define when a substantial part of a B-Org's business is providing employee services to an FSO or its A-Orgs.

Although parts of those proposed regulations are now obsolete because of a subsequent change in the Code, they have languished, unchanged, for 18 years. They have not been withdrawn nor is there any likelihood of that happening. In addition, the preamble (pre-ramble? ) to the proposed regulations says: "Pending the adoption of final regulations, taxpayers may rely on the rules contained in this notice of proposed rulemaking and the Internal Revenue Service will issue determination, opinion, and ruling letters based on these rules. If any provisions of the final regulations are less favorable to taxpayers than these proposed rules, those provisions only will be effective for periods after adoption of the final regulations." Those, although the proposed regulations are not final, we can use them.

On August 26, 1987, the Treasury proposed regulations dealing with 414(m)(5), also known as management function groups. They also dealt with 414(n) (leased employees) and had a variety of proposals under 414(o). One of the first acts of the Clinton Treasury was to withdraw those proposed regulations, except for a portion dealing with leased owners, which is still proposed. Hence at present there are no regulations dealing directly with 414(m)(5). We were never promised reliance on the 1987 proposed regulations, and they have been off the table for nearly 8 years. Given that, it is absolutely amazing to see practitioners and well respected publications referring to them and in some cases trying to follow them!

What is left of the leased owner rules is discussed in Chapter 15 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)

© 2021 BenefitsLink.com, Inc.