Affiliated Service Group; key and HCE employee determination

We TPA a doctor's office.  The doctor is 100% owner of the practice but does not participate in the 401k plan.  His top assistant is an officer and makes over $250,000 but has no ownership.  Based on that, she is an HCE and a key.  She has 3 children working there not at that compensation level.  They are not HCE or Key.

The top assistant is 100% owner of a separate business that has most of its business with the doctors office.  We are looking into it but lets assume an ASG exists.  She is also the only employee of the separate business.

The separate business is not an adopting employer, but we still need to include the ASG for testing purposes.  With no other employees in that business, this does not impact the plan very much. 

(1) Unless, because of the Top Assistant being 100% of the other business, would she be considered HCE and Key regardless of income?

(2) And if so, does that mean her 3 children are now HCE and Key?

But if the separate business did become an adopting employer of the 401k plan:

(3) Would the top assistant would now be HCE and Key regardless of income?

(4) Would the 3 children also become HCE and Key in the 401k plan?  Two are over 21 and one is 20.

Thank you for any comments.    

If it’s an ASG, she’s key and so are the kids. 

Thank you

Is that the case even if the ASG is not participating in the plan?

9 hours ago, Santo Gold said:

Thank you

Is that the case even if the ASG is not participating in the plan?

 

 

Plan participation doesn't impact that determination. 

I agree, IF there is an ASG but not convinced that there is. Unless it was a management company situation, I thought there had to be at least some ownership overlap. 

From a great Ferenczy article:

What is an A-Org?
An A-Org is an organization that (1) is a service organization; (2) owns, or is deemed to own, some interest (no matter how small) in the FSO; and (3) regularly performs services for the FSO or is regularly associated with the FSO in providing services to third parties. Whether an A-Org regularly performs services or is regularly associated is a facts and circumstances determination.

What is a B-Org?
A B-Org is an organization for which (1) a significant portion of the business of the B-Org is performing services for the FSO or related A-Orgs; (2) the services are the type historically performed by employees in the field of the FSO or its A-Orgs; and (3) at least 10% of the B-Org is owned or deemed to be owned by one or more highly compensated employees (“HCEs”) of the FSO or its A-Orgs. Importantly, a B-Org does not need to be a service organization. If the B-Orgderives at least 10% of its gross receipts from providing employee services to the FSO or its A-Orgs, then it is a“significant portion” for purposes of the first test. It could be significant if those receipts are as low as 5%.

Looks to me like no ownership overlap no ASG.

58 minutes ago, CuseFan said:

Unless it was a management company situation, I thought there had to be at least some ownership overlap. 

Santo Gold, CuseFan is totally right re the above, and it may be even simpler. Is the "top assistant['s]" $250k on a W-2 from the Dr. or does the cash go to the company she owns before it's paid to her? If her company is not getting paid, it presumably is not providing any services to the Dr.

And after asking more questions, there is no ownership overlap, so no ASG.  Thank you for all replies