Controlled Group - Offer of Benefits

Hi. I always struggle with issues related to controlled groups. A hospital wants to start a joint venture with another group. The hospital will own 51% of the JV. Does that level of ownership allow the hospital provide benefits (retirement, health, etc.) to the employees of the JV?

Thanks.

This is a very difficult situation that does not lend itself to easy answers. Owning 51% of a subsidiary on its own is not enough to form a controlled group, but the various stock exclusion and other rules can easily change that outcome depending on how the other 49% is owned. Even if not a controlled group, the JV could be covered under the hospital's benefits but would form multiple-employer plans (both retirement and welfare). Medical JVs in my experience are often affiliated service groups, which combines the employers for retirement and some other Code purposes, but not all welfare purposes, so you could have a single-employer retirement plan and a MEWA for medical benefits. Watch out if the hospital is self-insured; running a self-insured MEWA can be a crime depending on the state. If the other 49% owners also have separate medical practices, those could be ASGs as well, expanding the affiliated group to those practices. The hospital is probably tax-exempt, whereas the JV probably is not, so you may need different plan types depending on whether the hospital's plans are only permitted for tax-exempt organizations.  

Refer the hospital to its expert ERISA attorney, who may also need to bring other lawyers with different expertise into play.  As EBECatty says, this sounds like a complex question with many, many issues.