The purpose of this simulation study was to assess the performance of latent variable models that take into account the complex sampling mechanism that often underlies data used in educational, psychological, and other social science research. Analyses were conducted using the multiple indicator multiple cause (MIMIC) model, which is a flexible and effective tool for relating observed and latent variables. The data were simulated in a hierarchical framework (e.g., individuals nested in schools) so that a multilevel modeling approach would be appropriate. Analyses were conducted accounting for and not accounting for the nested data to determine the impact of ignoring such multilevel data structures in full structural equation models. Results highlight the differences in modeling results when the analytic strategy is congruent with the data structure and what occurs when this congruency is absent. Type I error rates and power for the standard and multilevel methods were similar for within-cluster variables and for the multilevel model with between-cluster variables. However, Type I error rates were inflated for the standard approach when modeling between-cluster variables. (Contains 5 figures and 6 tables.)