Cash Balance Contribution Deductibility

This may be more of an accountant question, but I'm not sure the answer.

We have one plan that was adopted by two employers (one employer is owned by the husband, the other by his wife).  When it comes time to fund the contributions, do they need to be funded by each employer or can one employer fund the entire contribution (including the other employees)?

In other words:

Employer A - 5 eligible employees
Employer B - 5 eligible employees

Does Employer B have to fund the portion of the contributions for their employees or can Employer A contribute (and deduct) the entire amount?

Are A and B a controlled group?

Always defer to the accountant, but if companies are in a controlled group and such companies file a consolidated tax return, then I think the source of subsidiary funding doesn't matter. So if A&B are CG and AB files consolidated return (if not pass-thru) or H&W file joint return, it likely doesn't matter where the cash comes from. However, when it comes to determining an owner's compensation I expect you would have to allocate the expense to the appropriate business. I wouldn't think you could, for example, have wife's company pick up expenses of husband's company to facilitate increased compensation for husband (or vice versa). I don't know this for sure but that is what makes sense to me and I fully invoke CBZ's above disclaimer.

55 minutes ago, C. B. Zeller said:

Are A and B a controlled group?

Yes, it's a controlled group.  Husband owns 100% of Company A and Wife owns 100% of Company B

15 minutes ago, metsfan026 said:

Yes, it's a controlled group.  Husband owns 100% of Company A and Wife owns 100% of Company B

And you've determined that the spousal non-involvement exception does not apply?

414(b) says:

Quote

the applicable limitations provided by section 404(a) shall be determined as if all [members of the controlled group] were a single employer, and allocated to each employer in accordance with regulations prescribed by the Secretary.

The IRS has produced no such regulations. So, that leaves the allocation of the deduction to some reasonable interpretation of the taxpayer. Anything that's not abusive is probably ok, but I would encourage the sponsor to get advice from their accountant, if not an attorney, before doing anything questionable.

Out of curiosity, how is CG determined? Do they have any kids under 21?

Just because they each own 100% does not necessarily make it a CG.

Also, if they are not a CG, wouldn't this be a multiple employer plan?

Thinking out loud and hope that I did not miss anything.

How the contribution will be split will depend on the answers.

I'm treating your question as the hypothetical it is, to me, devoid of most context.

To file a consolidated return you need a parent-sub relationship, not brother-sister controlled group.

I'd have to trace through the rules, but based on controlled group (if you have) you would test deductibility under 404, limits under 415, etc. on combined basis, but these are still separate companies for tax purposes. If A contributes for B it will be treated as a payment to B and then B's making the payment for 1120 purposes. A is unlikely to get the deduction, but I defer to the hypothetical companies' CPA(s).