PEO Scenario

[bzorc]

Employer contracts with a payroll provider during 2003 to utilize their PEO 401(k) plan. He goes along with the employees and essentially everyone in the company becomes a leased employee.

A question arose that asks what would happen if the employer went back to work for the company and left his employees with the PEO. Could he have his own retirement program with the company (e.g a SEP or a Uni-K) that just covered him? I would be interested in opinions.

Thanks much.

[GBurns]

Aside from basic logic I thought that it had been well settled in the Courts etc that the employer cannot become a leased employee.

A good explanation of this and related issues can be found in the Q&A Column "Who's the Employer", note Q. 68.

[Alf]

No. He can have his own plan, but the company is treated as a sponsor of the PEO's multiple employer plan, so testing would be the difficulty. The leased employees are still treated as employees of the company and the company is still treated as sponsor of that portion of the PEO's plan.