Seeking guidance on Profit Sharing Plan with leased employees

[Guest CaymanDM]

Hello all,

I am seeking guidance on setting up a profit sharing plan. The Corporation was formed at the end of 2001 and I am the CEO / sole employee. I do have people working for me but 2 are part time (20 hours a week) and one works right around 1500 hours a year (estimated future work time as in the past the hours averaged 20-30 a week). These persons are employed by a leasing company that I contract with.

How can I set things up to exclude the leased employee(s)? I am happy to be creative and just wish to provide for my retirement.

I do have an extremely aggressive plan through the leasing company where I match 25-50% of leased employee contributions. So its not like I'm real cheap.

Can I make it so that I have immediate 100% vesting and have 2 year eligibility for others but am grandfathered in?

I have a brain freeze from all this stuff. Any guidance and or commentary is greatly appreciated.

Thank you in advance

Regards

[Archimage]

You can set your plan up with all of those features. You can also exclude leased employees but I think you might have to bring them back in if you fail coverage testing. I am not 100% sure about this so someone else please comment on the lease employee situation.

[actuarysmith]

In order to exclude leased employees from your plan, the leasing company has to provide for at least a 10% of pay money purchase or profit sharing type of contribution.

I have not seen many leasing companies that provide benefits at that level.

You could not use 2 year eligibility, but "grandfather" yourself. That would be a clear violation of discrimination in benefits, rights and features.

However, if the leased employees don't have much service with you yet, and you have had the company for a few years then you may count past service for eligbility and let yourself in right away.

[Archimage]

Can you not exclude a class of employees (i.e. leased employees) as long as you pass 410(B) coverage testing?

You can setup the plan to waive eligibility requirements if you are hired by a date that you can pre-determine for the plan. You can also setup the plan so that everyone hired by the effective date of the plan is fully vested.