SEP & Control Group Rules
I have a client that would like to set up a SEP for a businesses he owns 50% of and he receives a W-2. He also owns 100% another business with employees. Here are the ownership percentages:
Tom Bob
Company A 50 50
Company B 100 0
is there a control group issue here? He wants the SEP for Company A and fund a SEP for himself but would prefer not to cover Company B.
Permalink Submitted by William Tuttle on Wed, 2021-08-11 21:37
Tom would have to own >= 80% of company A for this to be a Controlled Group.
However, if company B regularly performs services for or is associated with company A in performing services for third parties, this could likely be an Affiliated Service Group.
Both Controlled and Affiliated Service Groups are considered one employer for employer retirement plan purposes.
Permalink Submitted by [email protected] on Thu, 2021-08-12 15:24
Thanks! Company B does sell products to Company A, so do you think that would create a problem? Another question: Tom is planning on purchasing all of Bob’s share of Company A by the end of the year. Company A’s fiscal year end is 09/30/21. If we are not under control group rules until the purchase is complete can Tom continue to fund the SEP until the sell is completed?