8880 / When is an employer considered to be part of a controlled group for purposes of the ACA shared responsibility provisions?

Companies that have a common owner will generally be combined for purposes of determining whether an employer is subject to the ACA shared responsibility provisions.¹ Whether or not a group of employers is treated as a single employer for ACA purposes is determined based upon the IRC Section 414 provisions that apply to aggregate certain employers for employment benefit purposes.

An employer is part of a controlled group if it is a parent-subsidiary controlled group of corporations and:

(1)  stock possessing at least 80 percent of the voting power or value of all classes of stock in each of the corporations (except the parent) is owned by one or more of the other corporations, and

(2)  the common parent corporation owns at least 80 percent of the total voting power or value of at least one of the other corporations.²

An employer is part of a brother-sister controlled group if five or fewer persons who are individuals, estates or trusts own stock possessing more than 50 percent of the combined voting power or value of all classes of stock of each corporation.³

Rules similar to the rules discussed above are applied in determining whether an employer that is not a corporation is treated as a member of a controlled group for purposes of the ACA shared responsibility provisions.⁴ All employees of members of an affiliated service group are also treated as though employed by a single employer.⁵