Form 5500-EZ $250,000 Threshold Determination

In determining whether a one-participant plan has exceeded the 250,000 threshold, all one-participant plans of the *employer* must be aggregated.  Does the *employer* include members of an affiliate service group?  There are one participant plans sponsored by different members of an affiliated service group.  Citations to the statutes or instructions are helpful but not necessary.  Thank you.

About the $250,000 tolerance, I see in the instructions no guidance about what “the employer” means. https://www.irs.gov/pub/irs-pdf/i5500ez.pdf

Following how Internal Revenue Code § 414(b)-(c)-(m)-(n)-(o) combine organizations and businesses might be a reasonable interpretation. Yet, that interpretation might be more cautious than the IRS’s interpretation.

Consider also that, even if neither ERISA’s title I nor tax law requires a filing, an employer or a plan’s administrator might voluntarily file.

Even when no other organization or business need be counted together with the distinct organization or business that maintains the particular plan, some prefer a filing to get a statute-of-limitations period running.

This is not advice to anyone.

When in doubt, I'd take the conservative route and file. Filing is easy even if technically not required, not filing is very expensive if you later find out it was required and you didn't.

The issue is that the separate plan exceeded 250k in the current year.  Taking the conservative approach in this case would result in prior filings being delinquent.  The instructions are somewhat ambiguous.  I was hoping someone was aware of the IRS position.  Thanks @Peter Gulia and @Lou S.!

Here’s the source of the $250,000 tolerance:

Pension Protection Act of 2006, Pub. L. No. 109–280 § 1103(a) (Aug. 17, 2006), 120 Stat. 780, 1057 (2006), available at https://www.govinfo.gov/content/pkg/PLAW-109publ280/pdf/PLAW-109publ280.pdf.

One of the five elements of the statute’s defined term one-participant retirement plan is that “the plan does not cover a business that is a member of an affiliated service group, a controlled group of corporations, or a group of businesses under common control[.]” PPA § 1103(a)(2)(D).

Also, consider PPA § 1103(a)(3): OTHER DEFINITIONS.—Terms used in paragraph (2) which are also used in section 414 of the Internal Revenue Code of 1986 shall have the respective meanings given such terms by such section.

I don’t know whether the IRS applies Congress’s statute as written. Considering nondetection or nonenforcement is beyond what I say in this post.

This is not advice to anyone.

I agree with filing to get the SOL running, but I would be more worried about nondiscrimination testing including 401(a)(26) given that this is a collection of one-person plans in an ASG.

@Peter Gulia Based on the language of the PPA you cited, we have instructed the client to determine the $250,000 threshold taking into consideration all one person plans in the related employer group.  Thanks for digging that up!!