Can Two Companies Share Benefits with Common Owner?

NCAgent

Guru
1000 Post Club
1,051
I heard this from an agent before but I want to make sure we both understood each other properly.

I have an owner of a company (100% owner) with about 85 employees. He has BCBS for them and has the whole shebang- 401K, group life, health, DI, AFLAC, sick days, etc. etc. etc. from different companies.

The owner also has another company with 3 employees in it, 2 are full time and one more will be full time later. He is 100% owner of that company for now and will partner with someone in the future for 50% ownership of the 3-person shop. That shop will eventually grow to maybe 5-6 people, though no timeframe on that.

Both companies are office-only workers. He doesn't own a roofing company and a telemarketing firm, for example. There is no significant change in risk between one company and another.
These companies are not under one corporate umbrella, they are independent of one another but partner with each other for good customer service and 2x the profitability. It's sort of like owning a pet shop and butcher shop next door to each other :D

My question is this: Can the owner carry over some, all, or none of those benefits from the large group to the smaller group? What would the process be and what are some of the things to look out for? This is for the state of NC if it matters. I was told by another agent that you can do that if you have common-ownership in both of the companies.
 
These companies are not under one corporate umbrella,

It has been a while since I have been involved in group health plans involving common ownership, but my recollection is you would need a corporate structure and would issue the policy to the holding company, not the individual companies.
 
Yes, this can be done.
It falls under the IRS code 414.

Have the client complete a common ownership form from the carrier. Now you might have to wait until open enrollment to bring the 3 employees on. Ask the carrier that question.

Those 3 employees will be eligible for Cobra, Fmla and so on.
 
Yes, this can be done.
It falls under the IRS code 414.

Have the client complete a common ownership form from the carrier. Now you might have to wait until open enrollment to bring the 3 employees on. Ask the carrier that question.

Those 3 employees will be eligible for Cobra, Fmla and so on.

Will the employees be eligible for the 401(k), group life, and things of that nature, too, or "just" the major medical?

And is there a minimum requirement to do this? If the company drops down to 1-2 people would that change anything? Does the owner have to pay the same required contribution for these employees or can they pay the insurance "at cost" for a higher premium?
 
Will the employees be eligible for the 401(k), group life, and things of that nature, too, or "just" the major medical?

And is there a minimum requirement to do this? If the company drops down to 1-2 people would that change anything? Does the owner have to pay the same required contribution for these employees or can they pay the insurance "at cost" for a higher premium?

The 3 life group is not being treated as a separate company. They are going to be treated the same as the employees from the larger group. So the owner will have to treat all the employees the same from a benefits standpoints. Look at IRS code 414.

What are you trying to accomplish?
 
The 3 life group is not being treated as a separate company. They are going to be treated the same as the employees from the larger group. So the owner will have to treat all the employees the same from a benefits standpoints. Look at IRS code 414.

What are you trying to accomplish?

This is just all new to me, and I was going to offer some voluntary benefits like voluntary life, DI, things like that. However, if ALL the employees are able to get DI and all of these other things from the employer then I want to present that option and let the owner choose. This question came from a source of inexperience and trying to be ethical and know the available options.
 
ABC is right, but keep some things in mind. Check with the carrier to make sure. The group usually (check your state) needs to be eligible to file a single tax return. Ownership at 50% or above is required. If medical is fully insured, the employer could discriminate with respect to contributions and eligibility. Depending on the locations, you might have a medical network issue. You will need to reveiw and possible edit plan documents.

Almost forgot. The smaller group may not want to folded into the larger group. With under-50 you get more protection and depending on the larger group risk profile, the smaller may be able to get a better deal on their own.

Good luck.
 
Last edited:
ABC is right, but keep some things in mind. Check with the carrier to make sure. The group usually (check your state) needs to be eligible to file a single tax return. Ownership at 50% or above is required. If medical is fully insured, the employer could discriminate with respect to contributions and eligibility. Depending on the locations, you might have a medical network issue. You will need to reveiw and possible edit plan documents.

Almost forgot. The smaller group may not want to folded into the larger group. With under-50 you get more protection and depending on the larger group risk profile, the smaller may be able to get a better deal on their own.

Good luck.

wow, leevena is always on point. thanks as always!
 
Back
Top