Affiliated Service Group?

I am certain I will never be able to provide enough information for anyone to form an opinion. I am just reaching out to see if folks think that the client should absolutely obtain legal advice regarding ASG, or if I am totally over-thinking the ASG issue.

I received a call from a potential client (with no plan in place currently). He is a surgeon who works for a hospital as an employee and participates in the hospital's 403b plan. He gets both elective deferrals as well as employer contributions.

He is also an eminent researcher, who then forms companies to commercialize on his research. He has some equity ownership in these companies, as well, usually between 3%-15%. The companies have their own management and employees. He is not an employee of any of these companies. However, some of these companies pay him, via 1099, for “consulting” to that company. He would like to establish a retirement plan for the 1099 “self-employment” income he receives from these companies.

1) Is it possible that there might be an ASG between his “self-employed business" and any of the businesses in which he has equity ownership? I wonder if his self-employment business could possibly be an A-org, or B-org to any of the companies he has helped to set-up. There is certainly some common ownership, he is being paid for providing services, and these companies are in the medical field. Thoughts?

2) Assuming that a plan for his self-employment income could be established, do we need to aggregate any of his 403b benefits from the 403b plan with ANY plan he establishes for his self-employed income (since he is a 100% owner of his self-employed business). It is my understanding that 403b and DC retirement plans must be aggregated for 415 limits. Does this aggregation also apply for any reason (like deduction limits) between a 403b plan and a Cash Balance Plan, for example?

Thank you for your thoughts.

I would suggest he get a formal legal opinion, especially if he is considering any kind of defined benefit plan like a cash balance. Spending the $$ on the legal analysis up front is worth it to protect the huge deductions to a defined benefit plan. 

I have seen service provides decline to take on clients, or even fire clients when a related employer group (control, affiliated, management etc) comes to light too late, and the sponsor chooses to ignore it. And then I see them spend WAY more $$$$$ to hire an ERISA attorney to clean it all up. Doing the analysis up front would have been MUCH more cost effective. 

Not to speak of what the expense would be if discovered under audit. 

Rarely do I see owners take the time and expense to have it done. But sometimes they do and those are the ones I WANT to work with because then I know they value the information they are given. 

But that's just my opinion, which is probably worth what you paid for it. 

I refer all to ERISA counsel when its ASG or complicated CGs.  We don't always require a formal opinion if its fairly simple and a memo is enough.

1) Yes, there could easily be ASGs between his SE business and the other entities in which he has an ownership interest. Assuming yes likely means no solo DB/CB on his SE income unless none of those entities has employees (unlikely, otherwise no need to ask your questions). Before jumping to the desired outcome of no ASGs and the ability to do a solo plan, I agree that getting a legal analysis and opinion is the smart thing to do and I would not, as a practitioner, to proceed in implementing such an arrangement for him without that.

2) Assuming no ASG, a solo DB/CB would not be aggregated with 403(b) for 415 as different plan type, nor deduction because there is no "employer" deduction in 403(b) attributable to the employee.