Statutory Employees

[Guest merlin]

"Statutory employees" are considered as employees for income tax withholding and as self-employed (except life insurance agents) for purposes of the definition of earned income.Where does this put them with respect to the employer's qualified plan?

[mbozek]

There are three different definitions of employee used to determine eligibilty for benefits: one is income tax (statutory employees), second is fica tax and the third is the definiton of employee under ERISA (Darden case). You need to read the plan document to see how term employee is defined. Some plans incorporate FICa defniniation, some use vague terms such as employed by employer. Some refer to employees defined in IRC 410. Under ERISA employer can limit plan participation to a classification defined in the plan. Many plans exclude statutory employees by definition. Some do not. It depends on how knowledgeable the draftsman was about the above definitions. Many plan documents create classes of accidental employees who become particpants in a plan because incorrect definitions were used.

[Guest merlin]

The plan defines "Employee" as anyone employed by the Employer,excluding independent contractors.If the statutory employees can have their own plans based on their earned income,this makes them independent contractors,right? Is this sufficient to keep them out?

[QDROphile]

According to the Microsoft cases, no.

[mbozek]

M: u need to do a lot of homework. 1. How are these statutory ee treated for other benefit plans covering employees? 2. do they have written contrectswith the employer or a third party? How did they hold themselves out to customers, other employees. What does the SPD say about eligible employees? Microsoft is not dispositive of all other cases involving independent contractors because the courts interpreted a provision in the ms plan which covered persons on " the ms payroll" as including independent contractors instead of limiting particpation to common law employees who had taxes witheld by MS.