Independent Contractor

[CLE401kGuy]

Sponsor has a participant who has terminated and become an independent contractor. As an independent contractor he or she provides services for the business from which he / she terminated - provided that the definition of independent contractor is met - the participant is considered terminated from the business and therefore eligible to take his / her distribution out of the business' retirement plan in which he / she had a balance - correct?

[mbozek]

Sponsor has a participant who has terminated and become an independent contractor. As an independent contractor he or she provides services for the business from which he / she terminated - provided that the definition of independent contractor is met - the participant is considered terminated from the business and therefore eligible to take his / her distribution out of the business' retirement plan in which he / she had a balance - correct?

You need to consult a tax advisor as the IRS frowns on this type of arrangement where employee continues to perform same services as inde contractor after termination. Need to google something called IRS 20 factors test (Section 530?) to see if this situation is a problem.

[ETA Consulting LLC]

As a rule, as long as there is a bonafide severence from employment, then a distribution would be available. Like Mbozek stated, there are implications when you arbitrarily assign someone a title of independent contractor when, under relevant facts and circumstances, they are a common-law employee.

Assuming the individual is, indeed, an independent contactor, they would be treated as a terminated employee.

Good Luck!

[CLE401kGuy]

As a rule, as long as there is a bonafide severence from employment, then a distribution would be available. Like Mbozek stated, there are implications when you arbitrarily assign someone a title of independent contractor when, under relevant facts and circumstances, they are a common-law employee.

Assuming the individual is, indeed, an independent contactor, they would be treated as a terminated employee.

Good Luck!

Thanks for the feedback, i really appreciate it!