S Corp SIMPLE Plan
Same owner of two separate S Corporations in the same industry has a SIMPLE IRA plan set up for only one of the two companies.
Does the owner have to offer the SIMPLE IRA plan to both companies if only currently offering to one?
Your thoughts or comments please.
Thank You!
K
Permalink Submitted by Alan Spross on Wed, 2010-12-01 03:28
Short answer – Yes, must offer to both if eligible. See the following copied from Denise Appleby’s Retirement DIctionary:
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Controlled Group and Affiliated Service Group Rules Apply
For the purpose of defining who the ‘employer’ is, the controlled group and affiliated service group (ASG) rules apply[4]. If an employer is part of a controlled group or ASG, the employees of the other business must be converted under the SIMPLE IRA and must be counted for purposes of the 100-employee limitation. The following example was provided by the IRS:
Example:
Individual P owns Business A, a computer rental agency that has 80 employees who received more than $5,000 in compensation in 2008.
Individual P also owns Business B, which repairs computers and has 60 employees who received more than $5,000 in compensation in 2008.
Individual P is the sole proprietor of both businesses.
Section 414(c) provides that the employees of partnerships and sole proprietorships that are under common control are treated as employees of a single employer. Thus, for purposes of the SIMPLE IRA Plan rules, all 140 employees are treated as employed by Individual P. Therefore, neither Business A nor Business B is eligible to establish a SIMPLE IRA Plan for 1997.
The controlled group or ASG rules are highly complex and are beyond the scope of this material. Situations where such relationships can exist may include the following:
– The business owner/s has ownership in more than one business
– The/A business owner is married to someone who has ownership in another business
– The business owner(s) has/have children or parents who has ownership in another business. Certain age limits apply
– If the business has a service relationship and, in some cases, an ownership relationship, with another business
An employer who is unsure of whether his business is part of a controlled group or ASG must consult with an ERISA attorney or other expert that is proficient in the area of ERISA
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[1] IRS Notice 98-4
[2] IRC § 408(p)(2)(D)
[3] IRC § (g)(5); IRC § 408(p)(2)(D)
[4] IRC § 414(b), IRS Notice 98-4
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