Inclusion of Consultant?

[Guest]

We've been retained by a plan sponsor to review an excluded participant issue. The person in question is a former owner/participant who terminated employment several years ago. His current compensation consists of $1,000 a month contracted "consulting" fees and $50,000 under a deferred comp agreement. The plan is a bank standardized master master plan.

The company has not been including this person in the allocation since his retirement. Under a nonstandardized plan, there would be ways to exclude him. Under the standardized version, must he be included? Is he an employee? Are his consulting fees income under the plan? I'm assuming that the deferred comp is not comp under the terms of the plan, but don't have a copy of the core document. Thanks.

[KIP KRAUS]

It shouldn't make a diference if the plan is a protoype/standard bank plan. Usually the adoption agreement to a prototype plan will define who is a participant and include a difinition of eligible compensation, especially if there is a company match.

I doubt that a consultant would be considered an employee, nor would deferred compensation be eligible compensation.

You need to find the adoption agreement. The bakn would most definately have it and the employer should have it.

[Guest beppie_stark]

The issue most likely hinges on the definition of "employee" which is usually determined by the exent of control the individual exercises over the circumstances of his labor. You should also review the consulting contract and any sale or termination of ownership agreement that exists.

[Guest laura2]

If the consultant is not a common law employee, then your client was required to exclude him/her from participation. Otherwise, the plan would run afoul of the exclusive benefit rule.

[Kirk Maldonado]

Had you thought about whether he should be properly classified as a leased employee?