Workshop 26 Advanced Affiliated Service Group and Controlled Group Case ...

10/9/2015

Workshop 26 Advanced Affiliated Service Group

and Controlled Group Case Studies

W. Waldan Lloyd Callister Nebeker McCullough

Salt Lake City, Utah 84133 wwlloyd@

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Affiliated Service Group Rules

? IRC ?414(m)

? Enacted in 1980 as part of the Miscellaneous Tax Act

? Prop. Regs. ?1.414(m)-1 through 4

? Issued February 28, 1983 ? Preamble states that taxpayers may rely on the

proposed regulations, "pending the adoption of final regulations" ? Final regulations have never been issued

Affiliated Service Group Rules

? IRC ?414(m)(5) ? management function rules added

? Enacted in 1982 as part of TEFRA

? Prop. Regs. ?1.414(m)-5 and 6

? Issued in last half of 1987 ? No indication of taxpayer reliance ? Withdrawn in April, 1993

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Affiliated Service Group Rules

? Congressional Intent

? When applying the qualification rules of the Code to retirement plans, certain multiple employer arrangements should be viewed on a combined basis

? The controlled group rules (IRC ??414(b) and (c)) are not broad enough to cover all ownership situations

? Service organizations present particular opportunities for abuses

Affiliated Service Group Rules

? Initial Guidance ? Rev. Rul. 81-105

? Provided examples of how the ASG rules are to be applied

? Rules in Rev. Rul. 81-105 still apply ? Not affected or superseded by the proposed

?414(m) regulations

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Affiliated Service Group Rules

? Basic Rule ? When considering the status of a qualified plan under ?401(a), all employees of the members of an ASG are treated as employed by a single employer

? Basic Rule applies when considering

? ?401(a)(4) ? general non-discrimination ? ?401(a)(5) ? integration ? ?401(a)(17) ? annual compensation limit ? ?401(a)(26) ? minimum participation rule (DB plans)

Affiliated Service Group Rules

? Basic Rule also applies to

? SEPs and Simples - ?408(k) and ?408(p) ? AND also applies the following rules to a qualified

retirement plan: ? Coverage rules ? ?410 ? Vesting rules ? ?411 ? Limitations on accruals ? ?415 ? Top heavy rules ? ?416

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Affiliated Service Group Rules

? The ASG rules (as well as the controlled group rules under ?414(b) and ?414(c)) also apply (see ?414(t)) to:

? ?79 ? Group term life insurance rules ? ?106 ? Contributions to health plans, MSAs, HSAs

and HRAs ? ?117(d) ? Tuition reduction programs ? ?120 ? Group legal services plans ? ?125 ? Cafeteria plans

Affiliated Service Group Rules

? ASG rules apply to (cont'd)

? ?127 ? Educational assistance plans ? ?129 ? Dependent care assistance programs ? ?132 ? Fringe benefits ? ?137 ? Adoption assistance programs ? ?274(j) ? Deduction limits on employee achievement

awards ? ?505 ? Welfare trust (VEBA) non-discrimination rules ? ?4980B ? Cobra continuation coverage

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