The Frugal Fiduciary Small Business 401(k) Blog
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Plan Design | Controlled Groups | Plan Setup
By:
Eric Droblyen
January 13th, 2016
Under the IRS’ controlled group rules, two or more employers with common ownership are considered a single employer for purposes of 401(k) nondiscrimination testing. These rules often obligate all members of a controlled group to cover their employees with the same 401(k) plan in order to pass annual coverage testing. It’s very important to pass coverage testing each year – failing can mean plan disqualification by the IRS – so making an accurate controlled group determination, and covering the necessary number of employees within that group, is essential for every 401(k) plan.