Related/Affiliated Companies

The IRS requires that the Pension Plan verify related/affiliated companies prior to calculating a writer’s pension benefit. The Signatories Coordinator at the Trusts contacts each Signatory EmployerAn employer who signs a collective bargaining agreement with the Writers Guild of America, agreeing to comply with its terms. to request this information. It is imperative that the Plan make these company associations to apply the IRC ceilingsThe maximum earnings amount on which contributions are due. Different types of employment have different ceilings. Once the ceiling is reached, no further contributions are due. correctly. Please click on this link  to review the letter that is sent to all Signatory Employers.

Affiliated Employers

The Internal Revenue Code treats commonly controlled entities as single entity for certain (but not all) Pension purposes. In general, common control is defined as 80% ownership.

There are two basic types of affiliated groups:

• Parent-Subsidiary Groups

  If an entity owns 80% or more of another entity, then the two are affiliated and treated as a single Employer. This is also true when Company A owns 90% of B and B owns 90% of C, then A, B, and C are all aggregated. Also, the form of entity does not matter. If a corporation owns 85% of a Partnership, the two entities are affiliated. Generally, studios own 100% of their subsidiaries.

  Exception: Solely for purposes of the benefit limit, the test is whether one entity owns more than 50% of the other. This does not apply to the compensation limit (or any other rule); it is also not relevant for the Brother-Sister group rules described below. Thus, if A owned 75% of B, A and B would be aggregated for purposes of §415, but not for purposes of §401(a)(17).

• Brother-Sister Groups

  In general, two or more entities are affiliated under these rules if the same five or fewer individuals (not entities) own at least 80% of each entity (individuals that do not own any stock in one of the applicable entities cannot be taken into account). However, they are not affiliated unless the sum of the ownership interestsAn amount charged to Employers when contribution payments are not remitted in a timely manner [per ERISA Section 502 (g) (2)]. Employers are required to remit contributions in a timely manner without an invoice from the Trusts. of these individuals, taking into account the lowest percentage owned in either entity by each individual is more than 50%.

Example B:
A owns 20% of Corporation X; B owns the other 80%, but assume that A owns 60% of Corporation Y and B owns 40%. In this case, the smallest interest owned by A in either corporation is 20% or the smallest interest owned by B in either entity is 40%. Thus, using their smallest interests, they together own more than 50% and meet that test. Similarly, their aggregate interest in the two entities is 80%. Thus, X and Y are affiliated.

Constructive Ownership Rule

Under these rules, certain individuals or entities are considered as owning the shares of other individuals or entities. There are a variety of rules that may apply here, but two of the more common ones are that individuals are generally considered to constructively own interests owned by their spouses as well as those of their children who have not attained the age of 21. Thus, returning to Example A, if the two shareholders were husband and wife, the entities would be affiliated because each party would be considered as owning all of the stock owned by the other. Thus, X and Y would be considered 100% owned by each party.

In summary, Affiliated Companies are companies that meet the following criteria:

• A contributing company that owns at least 80% of a Participant’s company’s stock. The company can have either direct ownership or ownership through an 80% or more subsidiary.
  
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  A contributing company that a Participant owns at least 80% of said company’s stock. The company can have either direct ownership or ownership through an 80% or more subsidiary.
  
• 
  A contributing company where the total ownership of each company is at least 80% and the ownership of each company consists of the same five (or fewer) individuals, estates, and/or trusts.

A form is provided to the Signatory Employer, which needs to be completed and returned to the Trust Fund offices to verify any companies related to the signatory employer. This form needs to be completed and filed whenever a change is made with affiliated companies. Click on this link   for the form.