401K Plan for Nanny?

[ERISA13]

I came across online where setting up a SEP IRA for your nanny is possible and almost seems a little common. Anyone ever set up a 401K plan for a nanny in order to have a vesting schedule? The nanny would be the only participant. Any info on this is greatly appreciated.

[Peter Gulia]

Internal Revenue Code section 4972©(6) makes it possible.

But I haven't seen it done because the people I know who use domestic help set up arrangements designed to support a position that the worker is not the service recipient's employee.

[GBurns]

I am curious as to how they could classify household workers especially a nanny, as anything but an employee.

http://www.irs.gov/businesses/small/articl...d=97877,00.html

See also Pub 926

[K2retire]

Many people try to claim that houshold employees are in fact independent contractors in order to avoid paying Social Security, Medicare, unemployment and such.

[Peter Gulia]

As part of an effort to set domestic workers as not employees, sometimes a service recipient makes sure that the agency not only has full legal rights and obligations to control the workers' performance but also in fact visibly exercises those controls and sometimes rotates the worker assigned to a job.

To return to ERISA13's query, it would be nice to learn whether any BenefitsLink reader has had any experience with implementing a qualified plan for a household employee.

[Guest Sieve]

I have not set one up--& under 4972, it must be a SIMPLE IRA--but have advised a client with regard to family-group employees (i.e., employees who work full-time for the family, working on the grounds, cleaning, cooking, doing errands, etc., etc.). Client did not deny that they were employees, but wanted to deduct plan contributions, & talked about setting up a separate corp. for that possiblility. Don't know what happened.

At the same time, employees involved only in handling family investments & manging money, for example, may be able to have a qualified plan where contributions are deductible (pursuant to IRC Section 404, but as a result of IRC Section 212).