1 owner - Multiple employer or Single Employer?

Company A owns Company B

Both companies run separately and have different EIN's.

Company A wants to offer one plan covering all employees equally in both plans.

Single or multiple employer?

If company A owns at least 80% of company B you have a Parent-Subsidiary controlled group. Which would be considered a single employer plan.

Thanks Lou. So no need then for a different EIN to formally adopt the plan?

3 hours ago, TPApril said:

Thanks Lou. So no need then for a different EIN to formally adopt the plan?

Huh?  Each employer already has its own EIN.  For a member of the controlled group to adopt the plan, you need an amendment whereby that employer adopts the existing plan. In our SMM we include the information on the adopting employer which does include their EIN.  So, what are you actually asking here?

The Plan document usually controls the process of a controlled group corporation participating in the plan.  You should look at the plan document.

It's a startup plan, no existing document. Intent is to include the two companies with common ownership. I guess you've answered my question, the second company would have to formally adopt the plan sponsored by the company that owns the second company.

1 hour ago, TPApril said:

It's a startup plan, no existing document. Intent is to include the two companies with common ownership. I guess you've answered my question, the second company would have to formally adopt the plan sponsored by the company that owns the second company.

Correct; in setting up a new plan, one of our document options is to include an additional adopter.  Our document system then produces the appropriate signature documents to include both entities.  Everybody signs as appropriate and you are all set!

I agree with Degrand.  I have worked with many different documents, some define the employer as the Adopting employer AND all companies that are part of the controlled group, so no need to adopt the plan.  Others will define as only the adopting employer and therefore even if another company is part of a controlled group they need to adopt the plan as an additional adopter.  Although I see no harm in them adopting even if the definition is including the controlled group, it just isn't necessary.

2 hours ago, PamR said:

I agree with Degrand.  I have worked with many different documents, some define the employer as the Adopting employer AND all companies that are part of the controlled group, so no need to adopt the plan.  Others will define as only the adopting employer and therefore even if another company is part of a controlled group they need to adopt the plan as an additional adopter.  Although I see no harm in them adopting even if the definition is including the controlled group, it just isn't necessary.

 

Sorry, but anyone who relies on a document that automatically includes other members of a controlled group is looking for trouble.  That language should never exist.  One company (even a member of a controlled group) CANNOT compel another company to have a retirement plan, so that language does nothing but cause potentially impossible results.  If you have plan language that still uses that language, consider getting rid of it.  If you have another member of a controlled group that needs to be part of a plan, have that entity formally adopt that plan.

Larry, totally agree that this definition of Employer is terrible, but it does exist.  I am moving all of my plans to a new document with the new restatement cycle and that is one of the items I verified before choosing the provider.  However, I thought it was still relevant to point out just in case the document did use the terrible definition.