Leased employees

[30Rock]

What are the thoughts on excluding leased employees? Does 414(n) apply to a 403b? I know a 403b plan can only cover common law employees, however after the statutory one year and other leased requirements, the leased employee is treated as a common law under qualified plan rules?

[oldman]

I am copying a response to this issue from from Mike Webb of Cammack LaRhette Consulting.

"It is interesting there is no reference to leased employees in the final

403(b) regulations. Thus, we need to look to Code Section 414(n) as your

describe. Though 414(n) does indeed treat leased employees as common law

employees after satisfying certain statutory requirements, including the

performance of services on a substantially full time basis for the

recipient of at least one year and performance of such services under

primary direction and/or control by the recipient, 403(b) is not listed

among the myriad of Code sections to which such treatment applies. Thus,

absent definitive future IRS guidance to the contrary, it would appear

that the leased employee rules do not apply - instead, the general

common law, facts and circumstances test applies to determine if the

workers in question are employees of the plan sponsor, at least for

purposes of the universal availability rule of Code section

403(b)(12)(A)(ii). We note that there are some older, pre-final

regulation private letter rulings that indicate in their facts that

leased employees as defined in Code section 414(n) could be excluded

from 403(b) plan participation, but it is not clear those continue to be

the view of the IRS, and they cannot be relied upon by other taxpayers

in any event. Also, note that there is one type of non-employee that

can participate in a 403(b) plan - a minister, under Code section

414(e)(5)."

[30Rock]

Thanks Oldman!