Who's the Employer?

Answer: Yes, they would have credit from A.

Think of it this way. Suppose the plan provided that all employees were eligible to participate other than those who worked in the accounting department. Suppose further than Mary works 5 years in the accounting department and then transfers to the sales department. How many years of service does she have when she transfers? She would have 5 years, because that is how many years she has been credited with the appropriate number of hours of service. Merely saying a group of employees is ineligible to partipate does not take away the fact that they are accruing hours of service. The situation is the same in the controlled group context.

Let me quote from Q 10:1 of my book, Who's the Employer?:

What is the employee plans question the controlled group rules answer?

For qualified plans, the controlled group rules answer a single question: "Who are the employees of the employer maintaining the plan?" There is almost nothing more important to understand in the controlled group chapters than this. Once the practitioner understands this point, the effects of the controlled group rules fall into place.

IRC §414(b) says that the employees of all corporations which are members of a controlled group are deemed to be employed by a single employer for purposes of [a host of Code provisions].

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