Under Age Children in plan

[Guest tajcc]

Has anyone ever encountered this situation before:

Owner has paid his children age 4 & 7 compensation. They enter the plan due to the employer opting any employee employed on the effective date does not have to meet the standard eligibility requirements - i.e. age 21, 1000 hours....

Is this possible to have these children earning wages - receiving a W2?

Thank you for any feedback.

[Belgarath]

It isn't uncommon for minors to work in a family business. Teenagers work for family and non-family businesses all the time.

I will say I've never seen anyone under the age of 9 on a payroll, but that doesn't mean it is impossible. Whether child labor laws apply to family members I can't say.

Even if "legal" it may raise red flags on audit, and client had better be prepared to justify it (assuming legal to start with.)

How much did they earn? If they pay them 5 dollars a day to pick up trash in the parking lot or something, it may be perfectly legitimate. If the 4 year old is being paid 10,000 per year, I think I'd have serious reservations! I can recall that as a 9 year old, I legitimately and honestly worked an average of around 5 hours per day during the summer - lawn mowing, weeding gardens, etc., etc. - if the family has some sort of agricultural business and sells vegetables at a farmstand, for example, then a certain level of compensation could actually be legitimate. If the business is software consulting, then it gets questionable...

So I have no firm answers - just discussion.

[WDIK]

A couple of similar discussions:

http://benefitslink.com/boards/index.php?showtopic=31801

http://benefitslink.com/boards/index.php?showtopic=31350