Seth wishes to circumvent the controlled group rules set forth in ERISA by opening a first service organization offering engineering services as an “A” organization. What is concept is Seth attempting to apply?
Explanation
Answer: B - The effort to circumvent the controlled group rules set forth in ERISA by opening first service organization (FSO) offering engineering services as an “A” organization is attempting to apply affiliated service groups. Affiliated service groups consist of a first service organization and one or more “A” or “B” organizations. These groups are used to circumvent the controlled group rules originally set forth in ERISA. An FSO must be a professional service organization whose principal business is the performance of professional services of one or more of the following: CPA, actuary, architect, attorney, doctor, and engineer. The “A” organization is an owner of the FSO and regularly performs services for the FSO. The “B” organization offers its performance of services for the FSO, or “A” organization and at least 10 percent owned by officers, HCEs, or owners of the FSO, or “A” organization.
