09/08/2009
What you should know about IRS rules on pool placement and foreign parent companies
When dealing with foreign parent companies with subsidiaries in the United States, correct pool placement is critical. Placement is based on the total employee count, not just those to be covered. It is important to remember that pool placement influences the following:
- The rate factors a carrier may use in developing the group rates
- Contractual state-mandated benefits based on the employee count
- Contractual federal-mandated benefits based on the employee count (such as the Federal Mental Health Parity Act required for groups of 51 or more employees)
- Possible fines imposed on the employer, producer and/or carrier for noncompliance with state and/or federal mandates
The question is often asked, is Asuris Northwest Health required to count all employees, including those of a foreign parent company, in determining a group's size for purposes of pool placement. The answer is yes, we are required to count all employees, including those of the foreign parent company. Although foreign employees count for pool placement purposes, it may be possible to exclude non-resident alien employees from coverage as outlined in the Internal Revenue Code.
Additionally, a foreign parent company with one or more wholly owned subsidiaries in the United States and a fairly large number of foreign subsidiaries outside the United States must include all employees of any corporation throughout the world owned by the parent.
For ordinary income tax purposes, foreign corporations are not component members of controlled groups (See IRC 1563(b)(2)). However, the component member rules do not apply to controlled groups for qualified plan purposes (See IRC 410(b)). That means that for qualified plan purposes, the status of a corporation as domestic or foreign is irrelevant in determining if that corporation is part of a controlled group or the consequences of that membership.
In the example above, for purposes of a plan set up by one of the U.S. subsidiaries, it must include all employees who work for the U.S. subsidiary, its parent, domestic or foreign corporation and any other subsidiary of its parent, whether it's domestic or foreign.
This information is provided as general guidance and is not provided as legal advice. Any legal questions or issues should be reviewed by an employer's own legal counsel.
If you have any questions, please talk to your Asuris Sales contact.
« Back to Communications
|
