H2B Workers

[Guest Thornton]

A landscaping company hires Mexican laborers under a program called H2B. As the owner explained it to me, each state is allotted a certain number of these workers. Attempts must be made to hire American workers first. If this cannot be done, an application is made for H2B workers. They tend to be seasonal, but return year after year. He wants to eliminate these workers as a class from his 401(k) plan.

1) Does anyone know anything about this program?

2) If any does, can workers in it be eliminated as a class from plan eligibility?

Just when one thinks he has seen it all! Thanks

[Guest mjb]

Under ERISA an employer can use any criteria for selecting the class of eligible participants which do not violate the age/service requirements (cant require age greater than 21 or more than one yr of svc). There is no prohibition against excluding seasonal workers. IRS requires only that a nondiscriminatory group be covered.

[SteveH]

You aren't going to be able to exclude them by class unless you can pass discrimination testing. These H2B workers are living in the U.S. and being paid in U.S. dollar wages. I had a client once that owned a manufacturing plant in China or something. 100% of his employees were Chinese citizens living in China. They were non-resident aliens, a statutory excludable class. It sounds like your client's employees are resident aliens.

Americans working abroad are covered, foreigners working in the U.S. are covered. Foreigners living and working in a foreign country are not covered.

You will have to exclude because of minimum service or else test them as eligible but not benefiting. Just cover them and put a 3 year cliff vesting schedule on the plan.

[Guest jae3207]

If my understanding of H2B workers is accurate, they are contracted to work in the US under a temporary VISA. They are not residing within the US. Also, I believe that even if they earn income within the US, this income would not be counted, and the NRA stat.exclusion may apply, if there is 1) a special tax treaty between the US and their country of residence, or 2) their work length is deemed "short period" (e.g. - less than 90 days, total wages paid is $3,000 or less and work for a foreign corporation or work at the foreign office of a US corp.

A little more information would be helpful, in order to evaluate their status as an NRA for statutory exclusion.

[Guest Thornton]

The plan sponsor has no problem including them in the 401(k) plan because they usually do not defer anyway. However, including them requires an audit, which the sponsor does not want to pay for.