Controlled group rules apply to many types of employee benefit plans governed under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code, such as cafeteria plans, health savings accounts, and self-insured medical reimbursement plans. The rules treat two or more employers as a single employer because of their relationship to each other if there is sufficient common ownership among them or common joint activity.
Being part of a controlled group means that all members of the group are jointly and individually liable for the obligations of the group, which could include:
- Insurance premiums
- Plan termination liability
- Pension liabilities
- Notice failures
- Nondiscrimination testing
- ACA employer shared responsibility payments
- COBRA obligations and penalties
This makes it critical for employers to understand whether they are part of a controlled group and identify members of the controlled group to be able to properly administer their plans. The rules used to determine ownership are complex. This guide is designed to provide an overview of these rules.