SECURE 2.0 Changes Family Attribution Rules

Updated August 24, 2023

When applying retirement plan compliance requirements, certain related employers have long been required to be treated as a single employer due to the controlled group or affiliated service group aggregation rules (you can learn more about related employer groups here).

Determining whether employers are related often involves looking at common ownership of companies. This is where ownership attribution rules play an important role: they define circumstances when a family or a business relationship may cause a person or an organization to be viewed as owning an interest in a business, potentially resulting in a related employer group.

SECURE 2.0 changed two important family attribution rules: attribution because of state community property laws and attribution between parents through their minor child. This change is effective after December 31, 2023 (initially applying to plan compliance / reporting years beginning in 2024).

Community Property Rules Overhauled

Before SECURE 2.0: In states with community property laws (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), even if two married individuals wholly owned entirely separate businesses, they were deemed to own a direct interest in the other’s business. This resulted in a related employer group (a controlled group), meaning the otherwise separate businesses were considered one business for retirement plan purposes.

In states without community property laws, spouses were not deemed to own a direct interest in each other’s business. In these states, the wholly owned separate businesses of the same spouses were treated as separate, unrelated employers for retirement plan purposes if they met the non-involvement exception to the spousal attribution rules.

SECURE 2.0 Change: Effective in 2024, community property laws will be disregarded for determining business ownership. This ensures equitable treatment of businesses. The spousal non-involvement exception in controlled group determinations is available in community property states. Individuals in community property states will no longer be deemed to own a direct interest in their spouse’s businesses for either controlled or affiliated service group determinations.

Attribution to Minor Children Updated

Before SECURE 2.0: When parents of a minor child (defined as under age 21) each separately owned 100% of their separate businesses, those businesses were considered related – a single employer for retirement plan purposes – just because the parents had a minor child. The child was deemed an owner of the businesses, causing them to be under common control. That was true regardless of the parents’ marital status.

SECURE 2.0 Change: Now, ownership attribution through a minor, in and of itself, won’t result in a controlled or affiliated service group.

What Does it All Mean?

The reform in family attribution rules may redefine who is the employer for retirement plan purposes impacting plan operations, funding and deduction rules, compliance testing, and Form 5500 filing requirements. Businesses should be regularly reviewed to ensure related entities are appropriately identified, and this is especially important in the wake of a change in the rules. In particular, businesses that were members of a related employer group before the enactment of SECURE 2.0 should work with their legal counsel and retirement plan consultants to review whether their ownership and related employer group status has changed under the updated family attribution rules effective in 2024.

Here are a few examples of the consequences of such a change on a workplace savings plan.

  • If a related employer group no longer exists, businesses once covered under a single plan, will now find themselves able to maintain their own separate retirement savings programs. In some instances, splitting apart existing plans into separate plans for each business will offer simplicity and improve outcomes. If the employers continue to maintain an existing retirement plan together the plan becomes a Multiple Employer Plan, and certain plan operations that were once performed for the related group as a whole must now be performed separately for each business (most notably the annual compliance testing and funding and deduction rules).
  • If a related employer group no longer exists, businesses maintaining separate retirement plans that were combined for annual compliance testing will now operate entirely separately.
  • If an employer wished to begin a retirement savings program for its employees in the past, but was stymied by the need to cover multiple businesses in a related group due to the family attribution rules in place before SECURE 2.0, they should revisit as the opportunity may now be available.

Actions to Take

  1. Evaluate and Adjust: Determining controlled group and affiliated service group relationships is complex. Where ownership is not straightforward, it is common for businesses to engage counsel specializing in ERISA to assist with attribution and related entity determinations. Employers should reassess their related group status to determine whether the new rules change outcomes and require proactive steps, including plan redesign and amendments, before the 2024 plan year begins.
  2. Use Transition Relief When Possible: If the relationship between employers changes due to the new rules, the transition relief period may be available for coverage testing in the year of change and the subsequent plan year, i.e., 2024 and 2025. It is important to note, though, that this relief is limited to coverage testing, and other compliance hurdles may be harder to overcome, making proactive planning a must.


The SECURE 2.0 Act’s changes to family attribution rules aim to provide clarity and fairness, especially for spouses running separate businesses. While these changes simplify certain aspects and allow more independent approaches for separate businesses owned within a family to operate their retirement savings programs, they also introduce new considerations and complexity. Those impacted by the related employer requirements should proactively engage with experts and review their circumstances to ensure they are well-prepared for 2024.

Let Pinnacle Plan Design Help

Consultants at Pinnacle Plan Design are actively monitoring new guidance concerning SECURE 2.0. This represents our understanding of the laws at this time. Additional guidance will provide additional clarity. If you have any questions about the application of the family attribution rules in your retirement plan, don’t hesitate to contact us at (520) 618-1305.

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