When offering benefits, sometimes other closely-related organizations' actions may also impact your compliance. If the ownership structure or relationship between your company and other companies is close enough to qualify under established IRS rules, you must take those other entities' actions, employees, and benefits decisions into account.
There are two types of arrangements that the IRS considers close enough to merit treatment as a single employer: control groups and affiliated service groups.
A control group is a combination of two or more businesses that are under common control under the law. Parent-subsidiary and brother-sister are the two most common forms of control groups. Each of these has an established definition describing the ownership structures of the related entities to determine whether the rules are satisfied.
An affiliated service group is two or more businesses that have a service relationship that meets the IRS' requirements. There are fact-specific tests to determine whether such a relationship exists. These tests examine ownership, the business relationship between the organizations, and other factors.
The determination of whether your company and any other entities meet either of these arrangements can be very complicated. You should consult with an attorney to assess the facts of your specific arrangement and the obligations that may result therefrom.