Leased Employed Hired as Common Law Employee

[DTH]

I would like to confirm my understanding on temps that are hired as a common law employee.

The temp would need to meet the 414(n) requirements before they would be considered a leased employee for plan purposes.

1. If the temp did not meet the leased employee requirements (e.g., did not work on a substantially full-time basis in their first year), you would not count their temp service with the employer for plan purposes.

2. If the temp did meet the leased employee requirements, you would count the service while s/he was a temp.

3. If the plan excludes leased employees, will the same apply as in 1 and 2? I think yes, because in order to be excluded from the plan the temp would need to be considered a leased employee first and then they would be excluded as a classification of workers. Then you would count service as you would when someone transfers between excluded classification of workers, i.e., you would count all service for all plan purposes.

[Guest Guest99]

See the following 414(n)(4)(B):

"In the case of a person who is an employee of the recipient (whether by reason of this subsection or otherwise), for purposes of the requirements listed in paragraph (3), years of service for the recipient shall be determined by taking into account any period for which such employee would have been a leased employee but for the requirements of paragraph (2)(B)."

414(n)(2)(B) is the "substantially full-time basis for a period of at least 1 year" requirement.

[masteff]

DTH - yes, I agree w/ your understanding on all 3 questions. That is how we administer it.

Knowing how HR likes to slide people into extra benefits if they can during recruiting, you have to be very strict about determining if the person qualified as a "leased" ee. One-year (we assumed cummulative versus continuous), substantially full time, under company's control/direction, and an unrelated third-party involved in the relationship. Those last two kick out a number of contractors; e.g., we had an electrician w/ his own business who did full time contract work for us for two years and the HR rep tried to argue "leased" ee status when we hired him. But it can also pick up some people who are on full time assignment from less traditional places, like engineering firms. (always go back to your facts and circumstances).

Note: we determined that a person can leave work and become a "leased" ee after the fact. Since it applies for vesting and eligibility, the impact is for someone who terminated before full vesting.