Exclude independent contractor from plan

[eilano]

Independent contractor would work 36 weeks out of the year (>1000 hrs), and the remainder she would work other places. Her income would be reported on a 1099. Could this employee be excluded from the plan since she is not being paid any W2 income?

[Guest Nabiyah1]

That certainly seems like a valid class to me. It is not violating any age and service requirements. I'd say yes you can exclude them.

[Jed Macy]

To be qualified, a plan must be for the exclusive benefit of EMPLOYEES. Therefore independent contractors must be excluded.

[actuarysmith]

I'm no attorney, but there are other things that I know get looked at when determining whether or not someone is an independent contractor.

For example, the "worker" should have total automony with regard to work hours and work location.

If the employer dicatates the time or place that the work is done, provides office supplies, computers, desk, etc - that worker could possibly be determined not to be an independent contractor.

In other words, a worker is not an indepencent contractor based solely upon being paid through 1099. There are also some facts and circumstances issues.

I would consult with a CPA or attorney knowledgable on the subject.

In fact, if the magnitude of people or dollars involved are large enough, I would contact an ERISA attorney to get a formal legal opinion.

[Guest Jeff V]

I believe I read a while back that due to the increase in "work-from-home" situations, the DOL was relying less on the worker's location, and more on whether FICA is withheld.

[Guest b2kates]

I agree with Actuarysmith.

Look at IRS form SS-8, it lays out the factors to determine if an individual is an employee or an independent contractor.

there is a 20 prong test.

The Microsoft case is a great lesson in misclassification.