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leased employees - don't count the time?


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414(n) gets into all the rules about leased employees, and the code sections it applies to... and doesn't mention 403(b).  So I was thinking that the time that an employee worked for a leasing agency would never be considered for the plan sponsor's 403(b) plan because the leased employee rules wouldn't apply.  And this article from Plan Sponsor magazine seems to support that theory:

https://www.plansponsor.com/blines-ask-the-experts-leased-employees-and-403b-plans/

But then I happened to come across IRS Pub 7003 (revised June 2021).  On page 2, it specifically says... well, let me quote it:
 

Quote

Unless the plan provides that all leased employees within the meaning of section 414(n)(2) of the Code are treated as common law
employees for all purposes under the plan, a determination letter issued with respect to the plan’s qualification under section 401(a) or
403(a) of the Code will be a determination as to the effect of section 414(n) upon the plan’s qualified status only if the application includes:
1) A description of the nature of the recipient organization;
2) A copy of the relevant leasing agreement;
3) A description of the function of all leased employees within the trade or business of the recipient organization (including data as
to whether all leased employees are performing services on a substantially full-time basis) and whether services are performed
under the primary direction or control of the recipient organization; and
4) If the recipient organization is relying on any qualified plan(s) maintained by the leasing organization for purposes of qualification
of the recipient organization’s plan, a description of such plan(s) (including a description of the contributions or benefits provided
for all leased employees which are attributable to services performed for the recipient organization, plan eligibility, and vesting).

Am I getting twisted up in the legalese, or is this being contradictory?  It sounds like this is saying that the 403(b) plan has to comply with 414(n)... but 414(n) itself doesn't reference that 403(b) plans have to subject to it.

Thanks for any help setting me straight...

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The text you quote is about what information an application for the IRS’s written determination on a § 401(a) plan (or a plan described in § 403(a)(1)) must include if the applicant wants the determination to consider the effect of § 414(n).  There is no such written determination one could get for a § 403(b) plan.

The answer you point to is consistent with the answer in Q 1:12 of 403(b) Answer Book.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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