Lease Employee Question

[Guest DTromb]

We have been asked to consider a new client who wants to startup a 401(k) plan.

The client has about 40 employees, including, we are told, 3 leased employees.

The client would like to cover the 3 leased employees in his plan.

Our experience with leased employees is limited, so I was hoping we could get some guidance with the following questions:

1. Assuming these truly are leased employees, is it accurate that the client will need to get the actual compensation paid to the leased employees from the leasing company, who may or may not want to give up that information? I am also assuming that any benefits paid to the leased employee by the leasing company will need to be provided to the client as well?

2. Let's assume, instead, that the 3 leased employees are actually mis-categorized and really should be considered as common law employees. (According to the financial advisor on the case the employees have been leased from the leasing company for over 3 years.) Now the Plan will need to cover the employees as common law employees, and again assuming that the client does want to cover the employees, am I right back where I was in question 1 with having to get compensation information from the leasing company?

Thanks!