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BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Determination of Controlled Group Status; Is It a Question That Should Be Handled by a Lawyer?

(Posted September 12, 2007)

Question 293: As a TPA, we are constantly confronted with potential controlled group issues. Through your Q&A column in BenefitsLink and your wonderful book "Who's the Employer", we can probably make a determination as to whether we have a controlled group. But I am not certain a TPA should be taking on this task, because to make a determination of controlled group status might be expressing a legal opinion and constitute the unauthorized practice of law. But, if I tell the client they need to hire an attorney for the project, the reality is that it probably will not happen -- so the TPA is stuck without a legal determination but knows the plan should be administered in compliance with the controlled group rules.

Should a TPA take on the task of determining controlled groups and affiliated service group or is this venturing into legal territory that should be avoided as the unauthorized practice of law?

Answer: Unfortunately, the issue of whether something is a legal question is itself a legal question. Putting it another way, state laws vary on what constitutes the unauthorized practice of law.

I have friends who are attorneys (some of my best friends are attorneys!) who argue vehemently that this is not an area on which a TPA should opine, meaning an attorney should be hired to provide an opinion. Speaking as a practicing attorney, we thank you for your support.

But when you get right down to the nub, why is interpreting and applying 414(b) in a simple case any different than running the general test? You are adding numbers and comparing them to certain standards. Affiliated service groups certainly can involve judgment calls, but controlled groups seldom do. There's a lot to keep track of; if you aren't familiar with the rules it is easy to overlook something, but 95% of the time the determination of controlled group status ought to be within the reach of most competent practitioners, especially those who have my book and aren't afraid to use it. (Yes, you can order Who's the Employer at

So I wouldn't necessarily be troubled with the notion that the client chooses not to have a legal opinion on this issue in the typical case. There are plenty of times in tough situations when I would be very insistent that the client seek outside help, because so much can turn on controlled group status, but those are the exception, not the rule. Learning how to tell the difference is a skill developed over years of practice. But here's a good rule of thumb: When in doubt, avoid drafty derrieres and defer to legal counsel.

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
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