Question one (1) of the three (3) questions that employers or their advisers need to have answered yesterday addressed how an employer must count employees for ACA to determine the employer’s size. The next question that employers must be able to answer – Question 2 – is whether the employer is a member of an affiliated group of companies – a controlled group.
Question 2: Are you part of a controlled group?
Whether there is sufficient common ownership among companies to establish controlled group status is key to understanding whether an employer is an ALE (applicable large employer). Controlled group is also referred to by the terms “affiliated” and “aggregation.” Controlled group status is a very complicated facts and circumstances assessment.
What are some of the questions that will help determine whether a controlled group is an issue? These include:
- Are there other businesses that the business owner is engaged in?
- Might other family members have a business interest?
These and other questions may make an employer an ALE when it may not otherwise seem that they are.
Some business owners may not recognize that they are part of a controlled group. A side hobby-based business totally unrelated to another business, a business owned in part by a spouse or a dependent can all factor in to the determination.
Employers may have assessed controlled group status in the past as it also relates to retirement plans, Medicare Secondary Payer and COBRA, among others.
Tax exempt organizations are also impacted by these rules. In such cases, they are often referred to as “affiliated service groups.”
Entities that are part of a controlled group must count employees of all of the entities to determine if they are an ALE. Controlled group status – and entities comprising the controlled group – must be included in the ACA employer reporting on Form 1094-C.
The IRS chapter that provides the basics to understanding controlled groups is 108 pages long and can be found at www.irs.gov/pub/irs-tege/epchd704.pdf . There is also an excellent webinar (June 2013) on the topic of controlled groups and common law employees archived under NAHU’s Compliance Corner webinars.