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Do You Know How Controlled and Affiliated Service Group Rules Apply to Qualified Retirement Plans?

May 19, 2017

Whitepaper and Video Offer Comprehensive Insight, Guidance

Understanding how controlled group and affiliated service group rules apply to qualified retirement plans and cafeteria plans is critical to maintaining tax-favored status. This applies both to plan sponsors of U.S.-based operations and foreign-based corporations with U.S. subsidiaries. In EisnerAmper’s whitepaper, Controlled and Affiliated Service Group Rules for Retirement and Cafeteria Plans, you’ll learn the ins and outs of this often-complex practice area. 

Essentially, if 2 or more entities are part of a controlled group of businesses, then the controlled group members are treated as a single employer when applying certain employee benefit plan requirements under the Internal Revenue Code (“IRC”). Similarly, 2 or more employers that are members of an affiliated service group are also treated as a single employer for purposes of satisfying the IRC controlled group requirements.

To view an example of a controlled group and its effect on benefit plans, please view the video below. 

Controlled Group

A controlled group is defined as a combination of 2 or more corporations that are under common control as specified under the IRC.  Examples of controlled groups include parent-subsidiary, brother-sister, or some combination of the 2. There are specific ownership attribution rules for trusts, spouses, adult and minor children, parents and grandparents.

Affiliated Service Group

These complicated rules are designed to preclude an entity from establishing an employee benefit plan for just one entity if there are 2 or more organizations that constitute an affiliated service group which, for employee benefit plan purposes, would be aggregated into a single employer.

Compliance Options

There are 2 options for compliance with the controlled group rules: a single employer-wide plan or multiple plans. The approach to compliance is usually based on whether the companies that comprise the control group represent similar industries or diverse industries and/or geography.

Compliance with the various rules for qualified plans is challenging for domestic companies and even more so for multinationals. However, the risk of noncompliance is far too costly to ignore.

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Peter Alwardt

Peter Alwardt is a Partner and the National Tax Leader of Employee Benefit Plans, specializing in employee benefits, tax and ERISA issues for domestic and international clients. He is a member of the American Institute of Certified Public Accountants and NY State Society of CPAs.

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