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What is a Controlled Group?

Overlapping ownership in two or more companies

A controlled group of companies may exist when there is overlapping ownership in two or more companies. There are two kinds of controlled groups: a parent-subsidiary controlled group and a brother-sister controlled group.

A parent-subsidiary controlled group exists when one company owns 80% or more of a subsidiary. A brother-sister controlled group exists when 5 or fewer individuals own 80% or more of two or more companies. In certain cases, ownership by a spouse, parent, child or grandchild may be combined to determine whether a controlled group exists.

Companies that are members of a controlled group may be tested separately if they pass minimum coverage tests. If they do not pass minimum coverage tests, controlled groups must be tested together. If a company fails to offer plan benefits to part of a controlled group and does not pass the required tests, they must pay mandatory contributions for the employees who were excluded from the benefits of the plan. 

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Information is provided for review and consideration only. Please consult legal and tax advisors for practical advice pertaining to your business and personal situations.

This page was last reviewed and/or updated on Friday, August 13, 2010 10:46 AM

 
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