affliated service group 101?

Here's the data:

Company #1 owner A = 50%; owner B = 50%

Company #2 same owner A = 25%; same owner B = 25%; owner C = 25%; owner D = 8%; owner E = 8%; owner F = 4%; owner F wife = 4%

Owners A, B, D, E and F are brothers, owner C has no family relationship.

Company #2 does 100% of it's work for Company #1 (no outside companies).

Would this be an affiliated service group relationship or any other?

What fields are the two companies in? Is capital a material income-producing factor for either business?

The first company is a fruit farm and the second company is a cold storage facility.

Neither farming nor cold storage are one of the specified fields in the regulations, and it sounds to me like capital is a material income-producing factor for both businesses. So I would say that neither one could be a service organization, so you don't have an ASG.

Thanks CB.  Both companies are in the same 401(k) plan, with Company #2 signed on as a participating employer.  The plan isn't set up as a MEP and has been reported as a single employer plan.  Trying to see what needs to be done in order for the client to straighten this out.

Agree with CBZ and that you have a multiple employer 401(k) plan issue you need to resolve - not just filing(s) but making sure each company's component plans satisfy coverage and nondiscrimination separately.

yes - fortunately both plans are ok when tested separately.  Thank you for the input.

If both plans have signed on to the document and each plan passes testing on their own, the hardest part sounds like it's covered and all good.

I think if you want to correct it properly you "simply" need to amend Form 5500 for all years where a single employer return was filed and replace it with multiple employer Form 5500 with the right attachments.

But you might want to check with ERISA counsel to see if there are other issues that might need to be addressed.

Thanks Lou.  Ironically the Plan WAS formerly a multiple employer plan.  All of the other entities dissolved and/or left, so the plan was restated as a single employer plan at that time.  I think that then the second company came on around 2019, so correction would be for 2019, 2020, 2021, 2022 and now 2023.  Not as bad as it could have been as you mention, though, since both pass testing and there is a participating employer agreement for that second company.  

However - I found some information online in reference to "if you were not in a controlled group but operated the plan as though you were....."  it states that "because the plan doc would not have contained the proper MEP language you have both a plan doc failure and failure to operate according to plan terms - VCP should be filed."

Company will be referred to ERISA counsel if they haven't already contacted them.

They may have a right of first refusal of the stock (especially for the stock in B) or options both of which might create a controlled group.