Insurance Company acting as a PEO?

[shERPA]

Insurance Agent/Registered rep has his own corporation with 6 employees. All 6 of the employees are on the payroll of the insurance company, but they work exclusively for and report to the insurance agent.

Furthermore the agent pays the full cost of the employees out of his production with the insurance company, and if his production is insufficient to cover the expense he has to write a check back to the insurance company. These employees participate in the insurance company's 401(k) and pension plans.

So, the agent wants to set up a DB plan and wants to know if he has to cover the employees.

To me, looking at it from the agent's side, the insurance company is acting like a PEO and the employees should be classified as common-law employees of the agent. The agent, who does a lot of 401(k) work and is familiar with this stuff, agrees that the arrangement is most like an employee leasing arrangement. He also freely states that any employee asked would say they work for him, not the insurance co.

From the insurance company side, it appears the insurance company is treating the employees as its employees. It is covering them in their plans, and the agent's corporation is NOT an adopting sponsor of the insurance company's plans.

Anyone run across this before? The insurance company is clearly not a PEO, but I don't see that this changes the relationship between the agent and "his" employees.

FYI but not necessarily relevant, for some life insurance production the agent is a "statutory employee" of the insurance company and participates in its 401(k) plan as well. Thanks.