Employees works in the UK, paid through a payroll company in the UK but the firm is in the US - Help? Are They Eligible?

[HarleyBabe]

Have a DC firm who has 3 employees in the UK. They were paying from US but it was very tricky apparently so they set up a UK payroll for them in some manner. So, are they eligible for the Plan? They meet eligibility but don't earn US income. Very confused. Please help.

Thanks.

[MoJo]

You *can* exclude non-resident non-U.S. citizens with no U.S. "source" income, but you don't have to. You *can* allow them to participate in the plan, BUT, the tax consequences of which are dependent on U.K. law (i.e., salary deferrals may not be a tax savings to them, depending on U.K. laws). Also, participation in the plan *may* (depending on U.K. law) interfere with other benefit rights (U.K.'s social security equivalent) where they are resident.

[HarleyBabe]

thanks, I think I'm going to exclude. That's just easier. That said, they would still be included for testing correct with a 0 if they met the eligibility requirements otherwise?

[MoJo]

If they are statutorily excludable, no - they don't count for testing purposes. Only if they are excluded by plan design and NOT statutorily excludable would you have to include them for testing.