Employees Xfer to a Leasing Company
Posted 18 August 2010 - 04:34 AM
2) They now participate in that employer's multiple employer plan
3) No break-in-service, so we can't pay people out
4) Can't terminate because of the existence of a replacement plan.
So what do we do?
1) Merger to multiple employer plan (seems unlikely)?
2) Nonelective transfers to new plan and then plan termination of old plan.
Have never really used nonelective transfers, but I'm pretty sure they would apply hear
Posted 18 August 2010 - 02:54 PM
The leasing company isn't a member of the controlled group of the employer. At least, you didn't say it was. There doesn't appear to be any reason you can't terminate the plan and transfer assets to the leasing company's plan.
Posted 18 August 2010 - 03:00 PM
Posted 18 August 2010 - 04:11 PM
So maybe wer're saying the same thing. I agree that if we do the nonelective transfers to the leasing plan, we can terminate the old plan. But people can't roll to IRA's or cash out, etc. - do you agree with that?
Posted 18 August 2010 - 10:09 PM
If this does not involve elective deferrals, then there's no problem terminating the plan and distributing.
Posted 19 August 2010 - 05:33 AM
Posted 19 August 2010 - 02:07 PM
If they are not employees of the leasing company, whose employees are they? Certainly not the "employer", I believe the leasing company fulfills all the necessary aspects of being the employer.
Posted 19 August 2010 - 02:14 PM
Please someone else chime in here and make everyone agree with me!!!
Posted 19 August 2010 - 02:21 PM
Posted 19 August 2010 - 02:22 PM
Definition: Workers who are officially employed by a professional employer organization, which is responsible for overseeing all HR-related functions, but who actually perform all work for your company
Employee leasing is a contractual arrangement in which the leasing company, also known as a professional employer organization (PEO), is the official employer. Employment responsibilities are typically shared between the leasing company and the business owner
(you, in this case). You retain essential management control over the work performed by the employees. The leasing company, meanwhile, assumes responsibility for work such as reporting wages and employment taxes. Your main responsibility is writing a check to the leasing company to cover the payroll, taxes, benefits and administrative fees. The PEO does the rest.
Posted 19 August 2010 - 02:30 PM
Posted 19 August 2010 - 02:53 PM
Posted 19 August 2010 - 03:04 PM
Posted 19 August 2010 - 04:23 PM
But of course we all know if it sounds too good to be true it usually is...
Posted 19 August 2010 - 04:30 PM
Posted 19 August 2010 - 04:31 PM
I suppose I could more appropriately label it as a PEO. But they are definitely on the payroll tax returns of a 3rd party, which of course is an important distinction from a payroll provider.
If the worksite employer meets the conditions of a common law employer, you don't look at the leased employee rules.
Worksite employees will be common law employees.
Posted 19 August 2010 - 04:37 PM
Sets the pay rate
Hires & Fires
Tells you when to come in, what time you can go home, and how to do your job.
I don't what other criteria anyone can point to that would suggest that these might not be the common law employees of the medical practice. To me, it is as obvious as 2+2 = 4.
And this is my understanding of how a PEO arrangement usually works, which is why the IRS came out several years ago mandating the multiple employer approach.
Posted 19 August 2010 - 04:58 PM
"Comments were requested on whether a change in status from a common law employee to a leased employee described in section 414(n) should be treated as a severance from employment that would permit a distribution to be made. After reviewing the comments, these final regulations do not add the change to leased employee to the list of distributable events and retain the use of the section 410(b) definition of employee for purposes of section 401(k). Because an individual who is a leased employee (as defined in section 414(n)) is treated as an employee of the recipient of the individualís services for purposes of section 410(b) (unless the safe harbor plan requirements described in section 414(n)(5) are met), the individual does not incur a severance from employment as a result of becoming a leased employee." (Emphasis added.)
So, there cannot be a distribution to employees who move to a leasing co. due to the lack of a distributable event: there is no severance of employment, and there cannot be a plan termination because a DC plan remains for the employer's employees.