Shared Employees

[thepensionmaven]

We handle three separate plans of three dentists who share a dental office, as well as a few employees. For purposes of eligibility and contribution, we are using RR 73-447 and RR 67-101 which basically says that although the employee works PT for each employer, she must participate and receive a contribution in each employer's plan if she is employed by that employer whether FT or PT

We have one employee who works for two dentists. She "terminated" employment with one of the dentists and now works FT and exclusively for one of the other dentists.

She wishes to rollover her vested account balance to the other plan. She already has an account in the other dentist's plan.

The plans are all safe harbor 401Ks with a discretionary PS contribution. She is not yet 100% vested in the profit sharing portion of either employer's plan.

Question #1 - is she entitled to a distribution, i.e. did she "terminate from service"

Question #2 - would she now become 100% vested in the profit sharing account balance in the first employer's plan?

[masteff]

Rev Rul 73-447 http://www.charitableplanning.com/document/680858

Rev Rul 67-101 http://www.charitableplanning.com/document/665480

I'll see your two Revenue Rulings and raise you one... Rev Rul 68-391. http://www.charitableplanning.com/document/675885

My opinion based on the above Rev Rulings is that she is a common-law employee of all three dentists but because she only has compensation from one, she only gets a contribution from that one. But for all other purposes of the plans, she remains a full-time employee. Which means 1) she has not had a separation of service and therefore cannot take a distribution (unless otherwise provided by the plan) and 2) she will continue to accrue service toward vesting w/ the other dentist and provided she keeps working will eventually be 100% vested in all of her benefits.

http://benefitslink.com/modperl/qa.cgi?db=qa_who_is_employer&n=57#.U_piGk90zcs

[thepensionmaven]

Thank you Masteff, I was coming to that conclusion.

However, I may have been unclear in that she previously worked for two of the dentists ( she never the third, she had no payroll from the third).

She stopped working for two dentists, does not have any payroll from Employer # 1 since 12/31/2012 and only has payroll from Employer #2 as of 1/1/2013.

I believe she can not rollover to an IRA because she has not separated from service.; but what about rolling over ( or transferring) her account) to the plan of Employer #2) and by so doing, make her 100% vested in the account from Employer #1? All plans allow for rollovers and trustee to trustee transfers to/ from other Employers' plans

[Bird]

I can't say I read the RRs carefully but I think that once the sharing arrangement stops, that she has in fact terminated employment with 'er #1, and therefore would be entitled to a distribution but not continued vesting service. 1 hour of shared service would change that for me, but 0 hours sure sounds like a termination of employment.

[thepensionmaven]

Thank you, Bird.

[K2retire]

This situation sounds like it could be a classic affiliated service group. If so, they are all one employer and she won't have a termination until she doesn't work for any of them any longer.