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Shared Employees


Brian Anderson

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I was wondering if someone could help me with a question.  I have two doctors whose businesses do not constitute either a controlled group or affiliated service group.  They have a shared employee relationship where one doctor pays the shared employees through his payroll and the other doctor reimburses for his attributable portion of the pay.  I know the proposed regs years ago were never finalized but are a good guideline.  My question here is prior service crediting.  One doctor's business started in 2018 and the other back in the 90s.  I have one employee hired back in the 90s.  Both doctor's have a 401k plan and the 2018 company started his plan effective 01/01/2020.  Would I credit the service from the older company back to the 90s for this employee?  Or is it permissible to credit all hours of service going forward from inception of the shared employee relationship?

Thanks so much in advance for any help anyone can provide.

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7 hours ago, Brian Anderson said:

I know the proposed regs years ago were never finalized but are a good guideline.

Brian, I think you might get some argument on whether they are a good guideline. First, they were proposed under a statute (414(o)), that doesn't say anything in and of itself, but just gives the IRA authority to write regs dealing with abuses. So they would not have interpreted the law, but rather created it. And they were withdrawn.

The above is not to say that they did not make sense and were not good policy, but for the moment I think it is RI (at least temporary) P the shared employee rules.

The facts in your question are not completely clear to me. But I think under current law you have a difficult threshold question, i.e., are you going to treat the practice that pays the individual and whose name is on the W-2 for all of the employee's compensation as the employer for all of the individual's hours, or are you going to say that for part of the individual's work he or she is really an employee of the entity for which the services are performed and that reimburses the other practice? Very difficult determination and highly dependent on facts and circumstances.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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Thanks Luke for you help with this.  I really appreciate it.  Yeah it's definitely not an easy determination.   I'm thinking more toward the interpretation of the leased EE approach treating the employer that pays the compensation as a "leasing organization" and the shared employee as a leased employee with respect to the other employer.  Again very hard to determine and based on all the facts and circumstances so I'll have to caveat this with our client.  I feel more inclined to recognize the service to be conservative in my approach for vesting and eligibility although I guess again it's arguable.  What other facts are you thinking would be helpful to make a more informed decision?  Again thank you very much for you time and help.

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8 hours ago, Brian Anderson said:

What other facts are you thinking would be helpful to make a more informed decision?

Brian, all of them. Pages. History of employment, who controls, who has hire and fire, what are the agreements between the practices, and more. The conservative approach is always best, if they are willing to pay the benefits.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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