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I'm going to be more direct than what I see in the prior messages. 1) She is NOT an independent contractor; she is an employee and will continue to be an employee even if they treat her as an IC. (Based on your description of what is being contemplated here). It isn't even a close call. 2) The problem will NOT be hers, it will be your client's (the business) who is misapplying the law and will be severely penalized for failure to withhold taxes on her payments. The penalties for failure to withhold are draconian. And doesn't matter if the employee actually paid all the taxes that would have been due to the gov't. 3) I tell my client (in this situation) to just tell her no. There is no reason to pay an outside attorney for an opinion UNLESS the client really thinks this is a good idea and wants to find out if he can do it (I would still tell him NO, he can't, but if he wants to waste his money on an atty....). It appears the impetus is coming from the employee. What would the client tell her if she asked for an extra 4 weeks of paid vacation? NO. Time to do the same thing here.

You could try doing the a26 test using average comp for the annual accrual method, or using the accrued-to-date method, you might get a better result.

They can't just sit on them. There are other threads on this topic - money deposited to the trust by the end of the plan year MUST be allocated and cannot be carried forward. True forfeiture (non-vested money) is an exception to this rule. So if an employer deposits more than they intended - it has to be allocated as SOMETHING unless all participants are at their 415 maximum.

There are several good articles out there on the impact of both Windsor and Obergefell. I have read a few in Journal of Pension Benefits. I don't think I have read one that focuses on domestic partnerships, but many discuss the issue. My AA has it as an to treat domestic partner as a spouse in the beneficiary section. I do not remember anything about stepchildren in the BPD.

I would probably view those amounts as incorrect deposits. Not necessarily match, or non-elective or anything specific, until the terms of the plan are used. So the plan has extra deposits (that might be coded as match at a recordkeeper- but they might not be match) - what does the employer want to use them for? Does the plan allow for an additional discretionary match on top of whatever fixed match you say they exceeded? Does the plan allow for nonelective / profit sharing? Once the plan decides what the extra money is - and the amounts are calculated and allocated - then you run the ACP test using whatever amounts are accrued (not necessarily what is actually in people's accounts - since adjustments between participants might be necessary). And I would not refer to them as forfeitures. They aren't.

There's no chance of QSLOB status? I would do testing (maybe pick a few years as a starting sample) and see if it passes. If it passes - then there isn't anything to correct. If it fails - then look at VCP, cause most likely yes, it would be hard to categorize this as a insignificant failure.

Without again reading San Francisco’s Equal Benefits Ordinance or the City and County agency’s administrative interpretations of it (I last looked six years ago), one imagines a contractor should be treated as meeting a condition if the contractor as an employer and a plan’s sponsor and administrator does all that it can do. A retirement plan’s sponsor can decide which forms of payout (single sum, payments for nn months or years, annuity for the beneficiary’s life) the plan provides for a beneficiary. But neither a plan’s sponsor nor its administrator decides the Federal income tax treatment that results from the payout option a beneficiary has chosen or from the distributee’s treatment for Federal tax purposes as a spouse or non-spouse.

I have a QDRO that has been submitted to Plan Administrator and was approved as a good QDRO and mailed back to my Attorney as well as the defense in April of 2016. It needed the signature of the Judge and while it was held by the Defense attorney stating he thought it had a lot of errors in it and needed some questions answered. WHY WAS THE QDRO NOT SUBMITTED TO THE JUDGE FOR THE PAST 3 YEARS? I have over the 3 years with proof of it, asked for this QDRO to be signed. SIGNED BY WHO? Court ordered in August 2018, for it to be signed. SIGNED BY WHO? and we had 60 days. Now that I sent a letter last week to my Union asking AGAIN about the 18 month rule and that I wanted this rule to be explained and then acted YOU DON'T NEED TO WORRY ABOUT THIS RULE. WHEN THE PLAN ADMINISTRATOR GETS A CERTIFIED COPY OF THE QDRO SIGNED BY THE JUDGE IT WILL ACT ON IT PROMPTLY. on as I am financially not able to hire any more attorneys to fight the defense but found that maybe the DOL THE DOL DOES NOT HELP IN THIS SORT OF SITUATION. YOU NEED TO HAVE THE QDRO SIGNED BY THE COURT AND A CERTIFIED COPY SENT TO THE PLAN ADMINISTRATOR. THAT'S IT. could help and if that would help to get this QDRO released and pay us. NOW, a new QDRO was submitted SUBMITTED TO WHO? August 20, 2019 and approved APPROVED BY WHO? but I asked for only a date change not a new QDRO which states exactly word for word the same thing as the QDRO that has already been approved by the plan administrator. YOU NEED TO GET THE QDRO SIGNED BY THE COURT. WHO PREPARED THE QDRO FOR YOU? DID YOU HAVE AN ATTORNEY? This is a 401(a) Money Purchase Plan. IN MOST JURISDICTIONS A QDRO IS MERELY AN ENFORCEMENT TOOL TO FACILITATE THE COURT'S AWARD OF PENSION OR RETIREMENT BENEFITS FROM ONE PARTY TO THE OTHER. IT DOES NOT HAVE TO BE SIGNED BY THE PARTIES. THE JUDGE CAN SIGN IT IN THE SAME WAY THAT IT WOULD SIGN A GARNISHMENT OR ATTACHMENT ORDER.

You said "I know this would make her no longer an employee," which is why previous responders reacted the way they did. You also say you are not missing the point, so fair enough. I suggest you consider putting some of the concerns expressed here in writing and advise them to confer with a lawyer because if you don't it is likely that you and your firm will be blamed if and when the IRS comes gunning for the employer because of what sounds like a potential gross mischaracterization of this individual as a "non-employee." Also, good advice about checking the plan document. If it does NOT have the so-called "Microsoft" language then there is even greater risk to you and your firm.

I'm willing to bet that your plan document, especially if it's a volume submitter document, excludes from participation "employees classified as independent contractors" (or similar language). This means that the plan does not cover employees who are classified (correctly or not) as independent contractors. This exclusion results from the famous Microsoft decision. I'm also willing to bet that your plan document doesn't define compensation as the amount reported on the W-2, but as the wages required to be reported on the W-2, a.k.a. information required to be reported under sections 6041, 6051 and 6052. So regardless of whether or not the employer actually provided a W-2 to the employee, if the wages should have been reported on a W-2 (because the person was an employee and not an independent contractor) then it is still plan compensation. But I think you're missing the point. The issue of employee vs independent contractor status goes well beyond implications to the plan. As ESOP Guy said, you do not just get to decide that someone is an employee or an independent contractor. See this page for starters, especially the section titled "Consequences of Treating an Employee as an Independent Contractor" : https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

A person doesn't get to decide if they are an IC or not. There are objective tests you follow and if the tests say they are an employee they are an employee. If you treat an employee as an IC there are serious legal issues. You need competent legal help on this question. What I just wrote is a very short summary of what they trained us to know back when I worked for the IRS. We were taught to look for employees who were treated as IC and if we found them problems for the employer followed.

Not true. There are many other threads on this topic. Advise her on the topics that you are qualified to advise her on, and advise her to consult an expert on anything else. Someone "advised" her to change how she is being paid after all.