When a business is labeled a controlled group (as defined below), the ACA mandate considers the entity a single employer. So, employees of companies within the same controlled group must be aggregated to determine whether the commonly owned companies are subject to the employer mandate.
There are three designations of controlled groups that are considered one employer under the ACA mandate. According to the IRS, these three controlled groups are:
Parent-Subsidy Group
This controlled group exists when one or more businesses are connected through stock ownership with a common parent corporation (e.g., a chain), and
- 80 percent of each corporation’s stock (except the common parent) is owned by one or more corporations in the group, and
- The parent corporation owns 80 percent of at least one other corporation.
Brother-Sister Group
This controlled group occurs in cases of two or more corporations where five or fewer common owners (individual, trust, estate) own directly or indirectly a “controlling interest” of each group and have “effective control.”
- Controlling interest: Generally means 80 percent or more of the stock of each corporation (but only if such common owner owns stock in each corporation), and
- Effective control: Generally more than 50 percent of the stock of each corporation, but only to the extent such stock ownership is identical with respect to such corporation.
Combined Group
This controlled group consists of three or more organizations that are organized as follows:
- Each organization is a member of either a parent-subsidiary or brother-sister group and
- At least one corporation is the common parent of a parent-subsidiary, and also a member of a brother-sister group.