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1、Problems and Issues with Nondiscrimination Rules - Case Studies March 18, 2003,To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of your organization and Hewitt Associates LLC,1,Agenda,Cont
2、rolled Group Issues Plan Aggregation Issues Determination of HCEs Determination of Most Valuable Accrual Rates,2,Controlled Group Issues,3,Groups to Include,Who knows the group? Are there leased employees? Are there affiliated service group relations? Are there acquisitions?,4,Issue 1: Who knows the
3、 controlled group?,Essential to involve legal counsel HR contacts may not know whether or not they have a parent or sub percentage of ownership if they do that foreign parent owns other U.S. companies whether business relationships constitute an affiliated service group or leasing arrangement Requir
4、es interpretations of corporate law WE DO NOT PRACTICE LAW,5,Issue 1:Who knows the controlled group?,A,B,C,D,E,F,G,H,K,J,I,USA,USA,USA,USA,USA,USA,USA,USA,France,France,Canada,Acquires 80%,100%,80%,40%,40%,50%,50%,-acquired prior year,85%,0%-Leasing grp,0%-Mgt Svcs only,0%-Svcs only,Exercise: Identi
5、fy controlled groups in years 0, 1, and 2, assuming acquisitions admitted to controlled group at end of transition period,6,Issue 1: Who knows the controlled group?,Situation: Company with foreign ownership Family, Inc. family company owner retiring Sells to New Dad, Inc., a large European company s
6、o children dont take over Family, Inc. checks and finds other US companies owned by New Dad to include in testing Later Family, Inc. finds that New Dads Canadian subsidiary also owns additional US entities to include in testing, but wonders about finding others,7,Issue 1: Who knows the controlled gr
7、oup?,Situation: Holding company All Alone Company is acquired by a holding company (Hold My Hand But Pretend Im Not Here, Inc.) All Alone is happy it still gets to maintain its own plans, payroll, do its own filings But, now All Alone must figure out who else Hold My Hand owns and how to collect dat
8、a from who in order to do its testing,8,Issue 2: Are there leased employees?,Leasing arrangements Considered leased employee if provide services pursuant to an agreement services performed substantially full time for at least a year services provided under direction of recipient employer not covered
9、 by a safe harbor retirement plan,9,Issue 2: Are there leased employees?,Situation: Typical leasing arrangements In NDT planning meeting, Who Me, Lease? Co. states they have only 3 leased employees jokes passing a small group in the hall that we had just passed all their leased employees After revie
10、wing a leased employee checklist, Who Me Lease calls back with 200 leased employees since the controlled group had only 2000 NHCEs before, the 75% ratio test changes to 68% and now requires an average benefit percentage test,10,Issue 2: Are there leased employees?,Situation: Company employees work a
11、t JV Division J is owned by Bigger Fish Company Bigger Fish Company spins off Division J to form a joint venture Division J employees become employees of the JV Bigger Fish Company also has a few employees who remain Big Fish, but work at the JV these employees are tested as employees by Bigger Fish
12、, but also must be included as leased employees by the JV,11,Issue 2: Are there leased employees?,Situation: Company acquires employees We Do Everything, Inc. acquires the office staff, their portion of the retirement plan, and the whole building of the We Dont Do Floors Co. The professional staff o
13、f We Dont continues to work in the building & control the work of the office staff We Do tests the office staff as employees We Dont includes the office staff as leased aggregates office plan as if its own,12,Issue 3: Are there affiliated service groups?,Affiliated Service Groups No ownership involv
14、ed, based in part on regular provision of services or management services by a service organization Dont forget affiliated service groups of affiliated service groups IRS will rule via Form 5300 filing whether an affiliated service group relationship exists,13,Issue 3: Are there affiliated service g
15、roups?,Situation: Company acquires employees - 2 We Do Windows, Inc. acquires the office staff, their portion of the retirement plan, and the whole building of the We Dont Do Windows Co. The professional staff of We Dont continues to work in the building & control the work of the office staff An aff
16、iliated service group relationship exists We Do and We Dont are tested as one controlled group,14,Issue 3: Are there affiliated service groups?,Situation: Attorneys disagree We Do Everything, Inc. now acquires We Do Windows, Inc. The affiliated service group relationship is causing its plan to fail under the new controlled group The attorney for We Do Windows thinks it should pass since they feel the relationship with We Dont Do Floors should also be an affiliated service group The attorney for
