Nondiscrimination Rules

[ILLMAS]

I have a client that owns two company's let say A and B, company A is a construction company and company B owns the building that company A rents. Company B has no employees, all the employees including the officer/owner are paid through company A, health insurance is offered but no retirement plan is offered. My client personal banker suggested to move the officer/owner salary to company B to take advantage of the company contributing up to 25% to his retirement (SEP). I mention to him, that is it's obivious the plan will only benefit the owner, but the rest of the employees are being left out, which is discrimination to the rest, even though it's two separate companies. I'm I somewhat correct not to agree with the personal banker?

Thanks

[ed_accountant]

I agree with you and do not agree the banker. If Company B owns the building and I assume pays the building mortgage, with only rental income and no other income to pay salaries and a pension.

[JohnH]

I think the common ownership rules will force all the entities to be treated as a single entity for purposes of determining whether benefits discriminate in favor of the owner. Of course, if the personal banker can come up with some cites to justify his/her position, then...

[Gail in Virginia]

I agree with John H., and before the personal banker asks it doesn't do any good to put one of the companies in the wife's name - it is still common ownership.