Who's the Employer?

Answer: What you've described sounds like a classic A-Org style affiliated service group. All the elements are there. That being the case, why do you want to have Corp A move its payroll to the partnership? All three entities are a single employer for retirement plan purposes. Corp A can simply adopt the plan and it will still be a single employer plan. All testing is done once, at the level of the group as a whole, regardless of which entities choose to sponsor the plan.

Of course, there may be reasons to collapse things into a single entity. For example, each member of an affiliated service group computes its deductible limit separately. In 2002, that's not likely to be an issue for a plain vanilla 401(k) plan, but it may very well be important in a cross tested plan.

If you decide to "move payroll" over to the partnership, then why would you leave Corp A in existence? If the doctor (for example) is working for the partnership, it is the partnership that should be paid for the doctor's services, and that would mean that no revenue would come to the corporation. Rather than just moving payroll, I would collapse the corporations into the partnership altogether, if you choose to go that route. As I said, however, you probably don't need to do anything of the kind.

For more on affiliated service groups and their consequences, see Chapter 13 of my book, Who's the Employer.

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