Plan coverage for leased employees

[katieinny]

I'm just looking for confirmation that the rules I remember for leased employees haven't changed.

My recollection is that a leased employee can be excluded from the leasing company's plan (plan in place at the company where they are performing services) for the first year, but after that they must be covered under the leasing company's plan -- unless the leased employees are covered by a 10% money purchase plan sponsored by the leasing organization (the company that leases them out).

Is that still the case?

[Jim Chad]

I believe you are on the right track.

A couple of thoughts:

You are basically correct in thinking that you have to treat a leased employee that has been performing services for more than a year as if he were an employee of the company.

Next, you may be able to exclude leased employees in your document and if you still pass coverage testing, you may be OK excluding them forever.

There are other requirements to the Money Purchase Pension to give you that escape hatch. You might want to seek legal council or just cover them like "regular" employees.

[Guest mjb]

Leased employees can be excluded under the IRC if the rules for participation under 410b are complied with or if they are not employed for more than 1 yr or for more than 999 hrs a yr. Leased employee who is not excluded under above rules can be excluded from the plan of the employer who receives the services from leased employee if vested benefits are provided under MP plan established by leasing org for leased employees.

Under ERISA leased employees can always be excluded from benefits of plan established by employer who receives the services from leased employees if they are specifically excluded from the category of employees eligible to participate in the plan, e.g, no individual performing services under a leasing arrangement with a third party is eligible to participate or if benefits are limited to those employees who receive compensation from the plan sponsor.