It’s the time of year when we all gather around with our families and loved ones. It’s also a good time to remember that your company may have its own family. Forgetting about that family can spell trouble.
The Internal Revenue Code (Code) and the Employee Retirement Income Security Act (ERISA) each include their own definitions of a controlled group, or a group of trades or businesses under common control. Generally speaking, companies are considered to be members of the same controlled group if there is at least 80% direct or indirect common ownership between or among different entities – the most common parent-subsidiary controlled group.
A simple example is a parent-subsidiary group in which the parent corporation owns 100% of its subsidiary or subsidiaries.
However, there are many more complicated rules that make this analysis less straightforward (just like family!). For example:
So why does this matter? The determination as to whether or not two companies are members of the same group touches all areas of executive compensation and employee benefits, and can have a material impact on whether or not you are operating your benefit plans and executive compensation arrangements in accordance with applicable rules. For example:
So, no matter the time of year, don’t let your company forget about its family!