Canadian Citizen

[Guest moltengater]

The prototype plan doc. excludes non-resident aliens with no U.S. source income. Client has hired a Canadian citizen. They understand that any W-2 EE with US-based income can participate in their 401(k) plan. This one has a few twists, however.

This Canadian EE has no taxable US income and does not get a W-2 form.

They have arranged to pay him through ADP Canada although they use PayCore (sp?) for all other EE's.

Employer considers this EE an employee, not a contractor or temporary EE.

He participates in other employer-sponsored benefit programs, such as life insurance and DI.

Employer now pays in to the Canadian program for him (CPP).

They understand that participation in their 401(k) plan would not necessarily result in any US tax deferral ability. They are more concerned with allowing him to defer so that he gets the ER match.

Under these circumstances, I'd like to know whether this Canadian EE can participate. I would assume he cannot as he would be excluded by the document. Any thoughts would be appreciated.

Thanks very much,

[Ron Snyder]

Damn Canadians ruin everything, even a perfectly good 401(k) plan.

Next you're going to tell us that without the Canadian they cannot pass the nondiscrimination test.

Your Canuck is SOL.

[Guest dbvail]

A bit harsh, and perhaps needlessly so.

In any event, if there is no US income, I don't know of any way he can be considered a US employee, and therefore will not be considered a participant.

An outside the plan bonus equal to the bonus on a hypothetical deferral may create all kinds of issues with other employees, so he is probably 'out of luck'

[A Shot in the Dark]

If the employer is concerned about making sure the employee is given every available benefit, give the employee a bonus of the hypothetical employer match and then "bonus up the bonus" to pay the taxes.