An architectural firm with 5 employees has sponsored a DB plan for 5 years. The 100% owner (an Architect) bought a non professional service employer business (self storage business) with 10 employees. Since the owner has a controlling interest in both businesses, employees of both entities are covered by the plan.

Would they still qualify for exemption from coverage? Perhaps we should get a determination from PBGC. I just wonder if "the principal function" of the business is performance of professional services at this point. The storage business now brings in more income than the architectural business.

Is this what the plan states?

Assuming you can get by pax' question, which is valid, it sounds to me like you should absolutely get a coverage determination.

It could be memorable. The one time I called in this regard, just to get the details of how the 25 employee/participant rule was properly applied, I had among most bizarre conversations that I can recall. The PBGC rep, who I think said he was a lawyer, must have used his name in the third person 8 or more times, like "Well, when people call here and ask _____ about this, _____ says .....". I will certainly never forget his name.

And his answer to my question eventually was, "it's whatever is on the form. Whatever number is there. I'm not an actuary you know." And he was unable to tell me the name of the form to which he was referring, i.e. PBGC Form 1.

Go for it!

Thanks for the replies.

A controlled group exists between the two employers. Therefore, we had the self storage business adopt the plan as a participating employer.

That probably takes care of your 410(b) issues, although I'm not sure it was the best course of action. However, the employee turnover may be so high that it provides little or no extra cost to the plan.