Family Attribution in Retirement Plans - Controlled Groups and Affiliated Service Groups (ASGs)

Definition: Determination of Family Attribution for Controlled Groups and Affiliated Service Groups

Summary of the 1563 rules when determining controlled groups, ownership is attributed from:

• spouse to spouse
  • unless ‘spousal non-involvement exception’ applies*
• parent to child, if
  • Is attributed the ownership of a minor child (under age 21)
  • Is attributed the ownership of an adult child (21 or older) only if the parent owns (directly or by other attribution) more than 50% of the company.
• child to parent, if
  • A minor child is attributed the ownership of a parent
  • An adult child is attributed a parent’s ownership only if the adult child owns (directly or by other attribution) more than 50% of the company.
• grandparents to grandchildren, if 
  • Is attributed a grandchild’s ownership (regardless of age) only if the grandparent owns (directly or by other attribution) more than 50% of the company.
• grandchildren to grandparents, if 
  • A grandchild (regardless of age) is attributed a grandparent’s ownership only if the grandchild owns (directly or by other attribution) more than 50% of the company.
• Siblings are not attributed the ownership of other siblings.

Spousal Noninvolvement Exception for Controlled Groups

*No spousal attribution exists under 1563(e) if the following conditions are met:

• The spouse has no direct ownership in the entity
• The spouse isn’t a director or employee and doesn’t participate in the management of the business
• No more than 50% of the gross income of the business originates from passive income (i.e.,  derived from royalties, rents, dividends, interest,  and annuities).
• Ownership interest isn’t subject to conditions that run in favor of the spouse or children under age 21.