Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

Retirement Operations Specialist

Fringe Benefit Group

Fringe Benefit Group logo

Trust Accounting/5500 Specialist

Sentinel Benefits & Financial Group
(Remote / Wakefield MA)

Sentinel Benefits & Financial Group logo

Retirement Plan Administrator


ForUsAll logo

Legal Assistant / Paralegal / Plan Document Specialist

Witman Stadtmauer, P.A.
(Remote / Florham Park NJ)

Retirement Plan Administrator

Retirement Solutions Specialists, LLC

Retirement Solutions Specialists, LLC logo

Pension Plan Administrator

DeMars Pension Consulting Services, Inc.
(Overland Park KS / MO / NE / OK)

Retirement Plan Administrator

Fulton Bank / Fulton Financial Advisors

Fulton Bank / Fulton Financial Advisors logo

DB/DC Administrator

Primark Benefits
(Remote / San Mateo CA)

Primark Benefits logo

Manager, Client Relationship Management

Guideline, Inc.
(Remote / Solana Beach CA)

Guideline, Inc. logo

Plan Administration Manager

Southern Pension Services
(Remote / Tampa FL)

Southern Pension Services logo

Product Support Specialist - Conversions part of Wolters Kluwer Legal & Regulatory
(Remote) part of Wolters Kluwer Legal & Regulatory logo

Mathematician or Benefit Analyst (Part-time)

American Pension, LLC
(Berkeley Heights NJ)

American Pension, LLC logo

Retirement Plan Administrator

Great Lakes Pension Associates, Inc.

Great Lakes Pension Associates, Inc. logo

Customer Success Associate

Guideline, Inc.
(Remote / Austin TX / Solana Beach CA / Portland ME / San Mateo CA / CO / FL / GA)

Guideline, Inc. logo

Retirement Plan Administrator

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

Nicholas Pension Consultants logo

View More Employee Benefits Jobs

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

Merged Business Can Be Separate From Earlier Businesses

(Posted September 11, 2001)

Question 127: Corp 1 is owned by doctors A and B. Corp 2 is owned by doctor C. Each corporation has a retirement plan. The two corporations will continue to exist through the end of the year and collect receivables. The doctors are starting a third company (Corp 3) to be the "operating corporation" going forward, with the three doctors as equal shareholders. All employees will be retained with the same job titles and positions. Is Corp 3 aggregated with the others? All three doctors are unrelated.

Answer: That's uncertain based on the facts given.

They certainly are not a controlled group, assuming that there are no facts giving rise to attribution or exclusion. A and B own 100% of Corp 1, but only 67% of Corp 3-- not enough for a controlled group.

The minimum required ownership does exist for an affiliated service group. But the real question is whether one corporation provides services to the others, or if they are related in providing services to third parties. The old corporations continue for the purpose of collecting receivables. I don't know about your business, but my receivables don't collect themselves. You need to send bills, deal with insurance companies, take the money to the bank, credit accounts, etc. And all of that implies employees who are performing those services. And those employees are going to come from Corp 3.

Is that enough to create an affiliated service group? We don't know. It depends on whether this represents "regularly providing services." This requires a close look at the actual facts of the situation, and may be a situation calling for a determination letter from the IRS.

On the other hand, if you leave skeleton staff at the old businesses to process things, paid from the old businesses rather than from Corp 3, then it becomes very difficult to argue that Corp 3 is regularly providing services to the other two corporations or that they are regularly associated in providing services to third parties.

These issues are discussed in more detail in Chapter 13 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)

© 2022, Inc.