Seasonal Employees

[DTH]

I have a plan that is trying to exclude seasonal employees. These individuals do not fall into any excludable classification. Could they exclude them if they are hired through a temp. service?

[Brian Gallagher]

I believe that these employees could be excluded under the leased employee rule, provided that all the rules are followed: they cannot make up more than 20% of the ER's workforce and they must be covered by a money purchase plan of at least 10% though the leasing agency. Also that plan must have immediate participation and 100% immediate vesting. There are certain exclusions to the participation rule. Plus the plan would have to satisfy coverage requirements. IRC 414(n) has a lot of stuff re: leased people.

[rcline46]

The IRS has never issued any regulations on seasonal employees so you must follow all of the existing regs. Usually leased employee rules won't work due to size of seasonal force.

If no employee works over 1,000 hours you will be home free. Otherwise you will have testing issues in the year following the year of 1000 hours if the employee works over 500 hours.

Judicious selection of plan year might help in keeping them under 1000 hours, but plans years off corp fiscal years can present their own problems.