Family offices are understandably private, with many aspects of their operations shrouded in secrecy, including their investments, family members, ownership details and the structures designed to protect them. However, too much secrecy around family relationships and other related businesses can cause compliance headaches for employee benefits, pension and 401(k) planning.
Rather than stemming from intentional noncompliance, these issues arise because advisors do not have a complete picture of the family’s ownership interests and affiliated entities. Without that visibility, it becomes difficult to determine which businesses are treated as a single employer under U.S. tax and benefits rules, which means family offices can unknowingly overlook obligations, apply inconsistent employee benefit structures or miss compliance requirements altogether.
Here’s how family offices can balance privacy with compliance.
What Is a ‘Controlled Group’ (and Why Does It Matter to a Family Office)?
When an investment is part of a “controlled group,” it can pull otherwise separate entities into a single-employer analysis — triggering employee benefits and retirement plan compliance obligations across the broader family enterprise.
While a “controlled group” is a specific legal terminology referencing Internal Revenue Code (IRC) Sections 414(b), 414(c) and 414(m) and 414(o), it generally covers companies considered a single employer for purposes of certain tax qualification rules. This treatment also applies under the Employee Retirement Income Security Act of 1974, as amended (ERISA), including a variety of rules impacting benefits and pension compliance issues, from coverage and nondiscrimination testing to potential successor liability.
I often describe controlled group issues to clients in terms of the “family” of businesses affiliated or associated with a company. For groups of trades or businesses, a controlled group exists when there is a parent-subsidiary relationship, and also when the same five or fewer individuals, estates or trusts (even when unrelated) have control over multiple businesses, with a typical threshold ownership interest of 80%. Without getting overly technical, it is important to gather as much ownership information as possible to identify the relevant players. This means asking questions about the family of companies.
Common Ownership, Attribution Rules, and When Family Relationships Become Relevant
When employers are under common ownership or effective control (under these technical IRC and ERISA rules), there are specific compliance requirements for employee benefits that must be considered. In some cases ,the relationships between family members and owners — and even the age of family members at the top of the family office chain of entities or in different chains — are relevant when applying complex attribution and beneficial ownership rules. For example, an individual’s ownership interests are generally attributed to the individual’s spouse, unless one of several specific and narrow exceptions applies. Failure to properly identify the controlled group of entities can result in painful penalties.
The common ownership can impact health care coverage mandates (think Affordable Care Act, cafeteria plans and multiemployer welfare arrangements (MEWAs), retirement plan (including 401(k)) nondiscrimination and coverage testing compliance, analysis of IRC Section 409A relating to deferred compensation, compliance with IRS multiemployer plan withdrawal liability, and potential successor liability for a buyer in a business sale.
For example, entities within the same controlled group are treated as a single employer for purposes of coverage testing under a 401(k) plan. As a result, offering greater benefits at one company than at another may require providing equivalent benefits, or otherwise increasing benefits under the less generous plan to pass coverage testing. On the other hand, if the entities are not within the same controlled group, providing the same medical plan to employees of all entities could create a MEWA, which is a concern in particular for self-insured medical plans.
None of these issues is insurmountable, but understanding the controlled group status is vital to designing effective employee benefit plans across the family office’s investments.
Balancing Privacy Concerns with U.S. Regulatory Requirements
Family offices should trust that their ERISA advisors genuinely need to have this information about relationships between businesses owned by the family office and other family members. Assessing which entities are part of the “family” enables holistic advice on the family office’s obligations, including whether employee benefits must be offered and whether the benefits provided are compliant with current rules. This becomes more complex for family offices with a global scope, particularly if the original family is unfamiliar with U.S. regulations and is hesitant to allow deeper review of the broader structure.
How ERISA Counsel Helps Family Offices Assess and Correct Compliance
ERISA counsel plays a key role in assessing whether there are multiple businesses in a family office within a controlled group and how those businesses can comply (or correct past noncompliance) with the interwoven IRC and ERISA rules.
Ultimately, the goal is to give the family office a clear, practical roadmap: identifying which entities are treated as a single employer, understanding where the benefits and plan risks actually are, and implementing a compliance strategy that protects the family enterprise while respecting the sensitivity of the ownership structure.
A proactive controlled-group review — especially before a transaction, a new benefits rollout or a plan audit — can help a family office avoid surprises and reduce the cost and disruption of last-minute corrections.