Subscribe Now!
Free Daily News, Jobs, Webcasts, Discussions
Display and Distribute
Your Job Openings
COVID-19 News
COVID-19 Webcasts

Featured Jobs

Client Service Manager

July Business Services
(Telecommute / Waco TX)

July Business Services logo

Benefits Plan Director

Taft-Hartley Trusts
(San Jose CA)

Defined Benefits Combo Cash Balance Consultant

Loren D. Stark Company (LDSCO)

Loren D. Stark Company (LDSCO) logo

5500 Specialist

401K Generation
(Altamonte Springs FL)

401K Generation logo

Client Services Representative

Ingham Retirement Group
(Telecommute / Miami FL)

Ingham Retirement Group logo

Trust Funds Accountant

RFK Medical Plan/JDLC Pension Plan
(Keene CA)

Retirement Plan Consultant

(Telecommute / Dallas TX / University Place WA / The Woodlands TX)

Definiti logo

Free Daily News and Jobs

“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

What Can and Cannot Be Done With an Affiliated Service Group

(Posted April 20, 2012)

Question 311: Three individuals are the owners of a medical company (LLC). Each owner has his own PLLC, which is an S-Corporation. The medical company has 4 employees. Can any one of the PLLCs sponsor a qualified plan that is not a prototype and that does not include the employees of the affiliated service group?

Answer: Yes, and no. Let's break this up into bite-sized pieces.

  1. Is the medical company (LLC) and each PLLC an affiliated service group? It surely sounds like it. All of them are service organizations. The PLLCs each are deemed to own an interest in the LLC (thanks to attribution from the PLLC shareholder). The PLLCs likely regularly perform services for the LLC or are regularly associated with it in performing services for the public. Those are all the element of an affiliated service group.
  2. Can an affiliated service group member set up its own plan? Sure. What do the ASG rules do? They treat the ASG members as though they were a single employer. So pretend there is only one company here: the LLC, which has 4 rank-and-file employees and which would have the 3 doctor-owners. Could the LLC legally set up a plan covering some employees and not others? Sure. You can even do it on a nonstandardized prototype. The plan just has to pass the minimum coverage test. And that brings us to our final question.
  3. If a PLLC were to set up a plan covering its shareholder, and nobody else, would that plan pass the minimum coverage test on its own? Not a chance. The plan would cover 1 out of 3 HCEs and 0 out of 4 NHCEs, a pretty obvious FAIL. But suppose the LLC were to maintain a plan covering the 4 employees. Now a PLLC could set up a plan covering its shareholder and permissively aggregate it with the LLC plan. Of course, if one takes that approach, the plan must pass the minimum coverage test and the nondiscrimination test on an aggregated basis. The two plans would need to have the same plan year and use same testing method.

The new 6th edition of Who's the Employer addresses these topics.

  • For affiliated service groups, see Chapter 13.

  • For consequences of ASG status, see Chapter 10.

  • For coverage testing, including permissive aggregation, see Chapter 23.

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)

© 2020, Inc.