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Posted

I have a client that owns 1) 100% of a Schedule C construction company 2) 50%/ 50% with another partner of a company that runs the management functions of the construction company and 3) 50%/ 50% with the SAME other partner of an unrelated independent living center.

The owner wants to set up a deferral-only 401k plan covering the 1) Sch C Construction company and the 2) management company (as an affiliated service group).

Does the addition of the management company as an affiliated service group extend the control group requirements to it as well? In other words, by including the management group, are we now required to include the 3) independent living center because it is a control group with the company that was brought in as an affiliated service group?

 

 

 

Posted

2 & 3 represent a brother sister controlled group. If 2 can pass testing excluding the employees of 3 your are fine. If 2 can't pass coverage excluding the employees of 3, you have a problem.

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