#Control group series#

Because her ownership rises above 50%, she must also count Diane’s ownership as her own.

Because the two of them are married, she is credited with his ownership, increasing her ownership to more than 50%. Under this example, Ophelia’s ownership increases to 100% because she is married to Harold.

Harold is not Diane’s father and has not adopted her.

Ophelia’s husband, Harold, owned 25% of the company.

Using the same assumptions as above, also assume Under this example, no ownership is attributed to Ophelia or Diane because Diane is over age 21 and neither owns more than 50% of the company.

Ophelia’s daughter, Diane, owned 49% of the company.

The below chart lays out these conditions. Attribution can occur through familial relationships and through organizations.Īs noted above, people must sometimes count their family member’s ownership percentages as their own. Attributed ownership occurs when a person is credited with another person or entity’s ownership. In addition to direct ownership, there is also attributed ownership. In this example, the value of Allison’s stock determines her ownership percentage, while the amount of voting power held by Bobby determines his ownership percentage. Specifically, it is important to determine who the owners are and how much of the company they own.Ī person’s direct ownership of an entity is equal to the greater of the value of her ownership stake and the amount of voting power tied to her ownership stake.įor example, assume a company is worth $100, Allison owns non-voting shares worth $99.00, and that Charlie owns voting shares worth $1.00. If two or more entities satisfy either of these tests, then those entities are part of a Control Group.īecause both of these tests deal with ownership, it is important to collect some information before conducting the tests. These tests are known as the parent-subsidiary test and brother-sister test. How does a company determine if it is a member of Control Group?Ī company is part of a Control Group if it satisfies one of two ownership tests. More specifically, they are networks of commonly owned companies. While being part of a Control Group or Affiliated Service Group is not inherently bad, discovering that a company sponsoring a plan is part of a Control Group after a plan is adopted often results in plan sponsors needing to make additional contributions and expanding plan participation.Ĭontrol Groups are a type of Related Employer. Why are the Control Group rules important?Īs noted in Part I, ERISA considers all entities that are part of a Control Group or Affiliated Service Group to be a single employer.

#Control group series#

Part I of this series discussed the general purpose of Related Employer rules, how they affect plan testing, and explained Affiliated Service Groups. There are two major types of Related Employers: Affiliated Service Groups and Control Groups.