I’m hoping someone can provide some guidance regarding administration of a SIMPLE IRA for two affiliated companies.

The scenario is as follows: Company A has a SIMPLE IRA. A second company has been created by the owner of Company A. Both Company A and Company B are 100% owned by taxpayer. Taxpayer understands that he needs to extend coverage under the SIMPLE to the new employees of Company B.

Both Company A and Company B have separate tax IDs.

The custodian of the SIMPLE for Company A tells taxpayer he can simply add the new names to the roster of SIMPLE participants under the Company A SIMPLE IRA.

Questions:
1) under this scenario, how does the SIMPLE custodian or the taxpayer account for the fact that a number of participants are not employees of Company A but are part of the Company A SIMPLE?
2) assuming that Company A and Company B file separate tax returns, how does company B correctly deduct contributions made to a SIMPLE IRA established under Company A’s tax ID?