What is a QSLOB?

In addition to being a favorite acronym under the Internal Revenue Code, and there are plenty to choose from, a QSLOB is a “qualified separate line of business.” Generally speaking, all employees in a controlled group of employers must be taken into account to determine if the minimum coverage requirements applicable to all qualified retirement plans and the minimum participation requirements applicable to defined benefit plans are satisfied. However, if controlled group members are treated as operating a QSLOB, each employer or group of employers in a line is allowed to apply those requirements separately with respect to the employees of each QSLOB. It is very important to note that this separate line of business exception does not apply to employers who are members of affiliated service groups.


A controlled group of employers must first determine its lines of business in order to demonstrate that it maintains qualified separate lines of business. The respective employers must identify all of the property and services provided to customers and then designate those to each of its lines of business in a way that follows its actual business operations.


Secondly, the following objective criteria must then be satisfied to demonstrate that each line of business is organized and operated separately from one another:

  • Separate Organizational Unit – each line of business must be organized as such

  • Separate Financial Accountability – each line of business must be its own profit center

  • Separate Employee Workforce – each line of business must have its own workforce

  • Separate Management – each line of business must have its own management

Finally, the following requirements must be satisfied in order for the controlled group members to demonstrate that each separate line of business is indeed qualified:

  • 50 Employees – each separate line of business must have at least 50 employees (does not apply in determining if a defined benefit plan satisfies the minimum participation requirements on a separate line of business basis)

  • Notice to Secretary – the employers must notify the IRS that they are treating themselves as operating a QSLOB for their qualified retirement plan purposes

  • Administrative Scrutiny – each separate line of business must meet either (a) the statutory safe harbor test (a highly compensated employee ratio percentage test amongst controlled group members), (b) one of the five administrative safe harbors or, (c) an individual determination requirement via submission to the IRS

The IRS’ flowchart on the following page illustrates the foregoing major provisions relating to the QSLOB requirements.




© Boutwell Fay LLP 2017, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of November 30, 2017.



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