Leased employees - recognizing service

[Guest Kelly Igel]

Here are the facts of the situation:

- A company's plan specifically excludes "leased employees" from plan participation (knowing that they may have to be included in the coverage testing in certain instances)

- The company "leases" an employee for two years and then hires him as their own employee

Questions:

- Does the plan automatically recognize that individual's two years of service as a "leased" employee for eligibility and vesting purposes under the plan?

- If not, and if the employer wishes to recognize that service, should they amend their plan document to recognize predecessor service with the leasing company?

Thanks.

[Guest asire2002]

Yes, service from the time the employee became a leased employee (generally after one year) is automatically credited. See IRC 414(n). If the employer wants to credit all service with the leasing organization, an amendment would likely be needed and other considerations (such as nondiscrimination issues) addressed.