Retirement Plan Legal Specialist Pentegra
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Bates & Company
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Central Pension Fund of the IUOE
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Defined Benefit Calculation Specialist/Actuary The Angell Pension Group, Inc.
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Central Pension Fund of the IUOE
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Trucker Huss, A Professional Corporation
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Carpenter Morse Group
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Retirement, LLC
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Jr Retirement Plan Administrator/ Administrative Assistant Hochheiser Deutsch & Co, Inc.
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Compass Retirement Consulting Group, Inc.
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Prime Pensions, Inc.
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Retirement Plan Relationship Manager ERISA Services, Inc.
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Nova 401(k) Associates
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Nicholas Pension Consultants
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United 401(k) Plans, Inc.
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Question 271: Arthur is 100% owner of his sole proprietorship. His wife, Betty, owns 99% of Partnership A. Corporation C (wholly owned by Arthur) owns the other 1%. Arthur provides management services to Partnership A. Arthur's child by a previous marriage, Daniel, works for Partnership A. I know this is a controlled group, but is Daniel considered to be an HCE by virtue of ownership? |
Answer: Yes. I'll explain, including references to my book, Who's the Employer?. (Subscribers can click to view online the text of references to sections in the book.) However, all this does is establish that if Partnership A were alone, Daniel would not be an HCE. But Partnership A is not alone. Partnership A is under common control with Arthur's sole proprietorship. The common control rules are applied before you apply the HCE rules. (See WTE 10:21.) What that means is that if an employee of any business under common control is a 5% owner of that business or another business in the same group of businesses under common control, then that employee is an HCE of the resulting single employer. For further discussion and examples, see Q&A 157. |
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.
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