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

Featured Jobs

Manager - Defined Contribution Plans

M2B Retirement Consulting LLC
(Remote / Wexford PA)

M2B Retirement Consulting LLC logo

Junior Implementation Specialist - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Ubiquity Retirement + Savings logo

Sr. Retirement Plan Administrator

Tycor Benefit Administrators, Inc.
(Berwyn PA)

Tycor Benefit Administrators, Inc. logo

Defined Benefit Plan Consultant

Sentinel Benefits & Financial Group
(Remote / Wakefield MA / Melville NY / Bingham Farms MI)

Sentinel Benefits & Financial Group logo

DC Plan Administrator

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Benefits Supervisor

NFL Player Benefit Office
(Baltimore MD)

NFL Player Benefit Office logo

Retirement Plan Administrator

Hessel & Associates, LLC
(Remote / IL)

Hessel & Associates, LLC logo

Plan Consultant

Sentinel Benefits & Financial Group
(Remote / Wakefield MA)

Sentinel Benefits & Financial Group logo

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

Senior Retirement Plan Administrator

Enhanced Retirement Solutions
(Rochester NY)

Enhanced Retirement Solutions logo

Senior Administrator / Site Manager

Nicholas Pension Consultants
(Remote / AZ / ID / NM / NV / UT)

Nicholas Pension Consultants logo

Senior Plan Consultant

Sentinel Benefits & Financial Group
(Remote / Wakefield MA)

Sentinel Benefits & Financial Group logo

Senior Actuarial Analyst/ Project Manager

Van Iwaarden Associates
(Remote / Minneapolis MN)

Van Iwaarden Associates logo

Defined Benefit Pension Consultant

The Ryding Company
(Remote / Westlake Village CA)

The Ryding Company logo

Retirement Plan Administrator

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

Nicholas Pension Consultants logo

DC Administrator

United Benefit Pensions Inc.
(Remote / Melville NY)

United Benefit Pensions Inc. logo

Compliance Analyst - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Ubiquity Retirement + Savings 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

Related Employer Definition

(Posted October 13, 2011)

Question 301: What is the definition of a "related employer"?

Answer: Like so many terms, the definition depends on the context. Why are you asking?

I'm going to be bold enough to assume that you are asking in the context of this column, which deals with retirement plans. When I use the phrase "related employer," or say "these employers are related" when talking about qualified retirement plans, I am referring to businesses that are treated as a single employer under the law. This includes:

  1. Members of a controlled group of corporations under Code §414(b);
  2. Members of a group of trades or businesses under common control under Code §414(c); and
  3. Members of an affiliated service group under Code §414(m), which can include an A-Org relationship, a B-Org relationship, or a management function group.
If two businesses fall under any of these categories, then most retirement plan rules treat them as a single business. Suppose, for example, that companies A and B are related. A sponsors a qualified plan for its employees. The employees of B don't participate. The fact that A and B are related means that when A tests the plan to make sure it satisfies the Code's coverage and nondiscrimination requirements, it treats the employees of B just like they were on A's payroll. Depending on the plan type, A may be able to exclude them, but A must at least count them in determining if the plan passes.

The same rules apply to other issues. Suppose A and B (still related) each sponsors a profit sharing plan and each contributes $49,000 to Oscar (who owns both companies). If A and B were not related, that would be just fine (better than fine, in fact, if you're Oscar). But since A and B are related, the law treats them as one employer. One employer cannot provide, under any and all defined contribution plans it sponsors put together, more than $49,000 of employer contributions to an employee during 2011.

Technically, there's one other way to be a related employer. The IRS has authority to write rules under Code §414(o) to make two businesses related. There are proposed regulations that have been sitting on the books for over 20 years, and the IRS has never finalized them. Until they are finalized, they have no effect.

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.