Control Groups and Retirement Plans

How Your Other Companies May Complicate Your Life (And Your Retirement Plan).

While I’ve worked with control groups for over 15 years I would not characterize myself as an expert. They can be very complex. That said, there are several points of value I think I can share that people outside of the TPA & ERISA Attorney realm may not be aware of.

Baseline Information

Control groups could be (very broadly) defined as a specific type and amount of ownership in multiple companies. Determining whether multiple company ownership meets the definition of a “control group” can be complicated. When a company with a retirement plan is part of a control group it changes the required annual testing, benefit, compliance, filing, allocation, and time required, not to mention the day-to-day running of a retirement plan. In the end, this can translate to: “Your retirement plan costs just went up”.

Whom does this affect?

Control groups can affect just about anyone in any situation: for-profit companies, non-profit companies, solo-k / no employee companies, company purchases, mergers and acquisitions, company sales, retirement plan terminations – and more. Anyone who owns a portion of more than one business can be affected.

Not all Control Groups Are Created Equal

We talk to clients, advisors, and investment company reps frequently who have some familiarity with Control Groups. Enough to be dangerous. It’s important to know that there are multiple types of Control Groups (and don’t get me started on Affiliated Service Groups). The difficulty comes when an interested party may read an article on control groups or hear a short talk and believe they know enough to make a determination for their situation. Not so. Reading several articles doesn’t provide the expertise or experience needed. Experts in this field would be ERISA Attorneys and (sometimes) TPA’s with specific training.

On The Same Subject

Here’s an unfortunately common scenario: A client tells their TPA of several other businesses they own in common with a few other people. The TPA digests that (with a dose of Pepcid) and recommends a review by an ERISA attorney. The client complains and asks why the TPA can’t just provide confirmation of whether the companies constitute a control group and ‘move on’.

The Elephant in the Room

When a TPA recommends a review by an ERISA attorney it may be a kind way of letting the client know they’re inadvertently expecting the TPA to provide rock-solid legal advice…the kind only an attorney can provide.

Wrapping It Up

While many control group assessments are quick, easy, and will be done by an experienced TPA, there will also always be a place for a more thorough review by an attorney specializing in retirement plan law. If you run into a control group situation in your business or with a client, depend on the experts, not on the internet.

That said, if you are interested in starting to dive deeper into control groups I have provided a few articles and websites below for further perusal. Just remember, reading these won’t make you an expert (or give you magical Control Group assessing powers).


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