leased employees

[PensionNewbee]

One of my clients told me all of his employees were hired by a HR company, and he now leases them, as of 6/1/2002.

These employees are still in the same job, still in the same place, so they are not considered terminated for distribution purposes, right?

If my client decides to make a contribution to the profit sharing plan, will he have to include his "former" employees?

[Tom Poje]

a leased employee shall not be considered an employee of the employer if

(amongst other things)

"...does not constiute more than 20% of the NHCE workforce."

(I'm just reading that straight from the document sitting on my desk. typical language, I bellieve required to be in the document, but I am no expert in that area)

well, since they are 100% of the workforce it looks like they are employees. does he have to include them in a contribution? of course not, you can exclude just about whoever you want. Will he pass testing? Of course not, there are a flock of NHCEs not benefitting.

[AndyH]

But check the document. They may not be excluded by class anyway. And for another thing they are not technically leased until a year has elapsed, although I'm not sure how that would work in this situation.

[Ron Snyder]

Employee leasing arrangements do not stop your client from being the employer. He has simply contracted with another company to prepare paychecks, make tax deposits, etc. All employees will still be considered his employees when it comes to providing retirement benefits, although be can offset the participants' benefits by amounts that they receive through a plan of the employee leasing firm. (Some employee leasing companies provide 401(k) plans with employer contributions.)