Non resident aliens

[Bird]

We've been blissfully ignorant of non-resident alien issues for the most part, but have to deal with it now.

The plan is pretty clear that non-resident aliens are excluded from participation if their only income is from non-US sources, or some such language; I don't have it handy.

I have a US company that has an employee working here on a Visa, and they noted that he is excluded because he's a non-resident alien. I don't think he is excluded, based on the fact that the compensation is from a regular US company. But I just thought I'd check to make sure I'm not missing anything that the rest of the world thinks is obvious.

(Of course, it's a takeover, and of course, his employment date is several years ago...)

[J Simmons]

His U.S.-source income takes him outside the exclusion (i.e., if the minimum age and service conditions are met, he's eligible)--if in the plan you are dealing with it is written as allowed in the regs.

[david rigby]

Sounds like he is a resident alien.

BTW, would it be different if he were "working here on a" Mastercard?

[ERISAnut]

Sounds like he is a resident alien.

BTW, would it be different if he were "working here on a" Mastercard?

You are both right. While he is a alien, he is a resident with US source income. Can you 'Discover' the difference?

[Bird]

Thanks...I guess I should go back and uncapitalize "Visa" but that would take all the fun out of this...

[mwyatt]

The US income is the important distinction. We had a client that had employees in a factory down in the Dominican Republic who lived and were citizens down there. They were appropriately excluded. The non-resident aliens who were living up here in MA and working, they were in the plan.

[DMcGovern]

I agree that the employees on a VISA, with income they are paying US taxes on would be included. You probably have already told the client that they would benefit from using EPCRS procedures to correct this?

[GBurns]

Would the wrongfully excluded employee benefit also ?

[DMcGovern]

The new correction procedure (see IRB 2008-35) is for the employer to make a QNEC to the plan on behalf of the employee that replaces the "missed deferral opportunity". The QNEC is now 50% of the calculated missed deferral (used to be 100%). To calculate the missed deferral, you multiply the actual deferral percentage for the year (or each year missed) by the employee's compensation for that same year. The bulletin has examples in Appendix B

If employer match was also missed, another QNEC would also have to be made on behalf of the participant. This QNEC is equal to the matching contribution the employee would have received on the full amount of deferrals calculated above (not the 50% QNEC deferral).

Correction methods are different if the plan is a safe harbor plan