How Can I Define A Resident Alien

[Kaizen401k]

Hello,

A client of mine wants to set up a clause to exclude employees with invalid SSNs and only allow for valid SSN employees and count this as the definition for resident aliens, how could this be better worded so it doesn't make obvious the possibility of invalid SSN employees working? 

Some ideas I've come up with are that don't satisfy the latter requirement are:

Only allow for employees legally residing in USA.

Exclude employees who use ITINs to file taxes.

Exclude employees without valid SSNs.

Only allow employees with valid SSNs.

 

Thank you for any ideas.

 

[Mike Preston]

You can't do that, so don't do that.

[Kaizen401k]

I was advised by a legal professional that one could exclude resident aliens but there needs to be a more specific definition of resident alien.

[Mike Preston]

Did your legal professional bother to provide you with a citation?

[Belgarath]

Mike - is it possible to exclude "resident aliens" as a class, subject to coverage testing?

[RatherBeGolfing]

2 hours ago, Belgarath said:

Mike - is it possible to exclude "resident aliens" as a class, subject to coverage testing?

I'm going to jump in here and say no. You are coming very close to discriminating based on national origin which is (or could be) a civil rights violation.  Find a better way to exclude those people.  

Also, there is a huge terminology issue here.  A resident alien is a lawful US resident who just happens to be a non-citizen.  A resident alien would have none of the issues the OP mentioned like SSN, legal status, etc. 

[My 2 cents]

When the IRS says "resident alien", the term has a specific meaning.  Is it permissible for a pension plan to use a conflicting definition of "resident alien" or must the term encompass someone if and only if the IRS would consider that person a resident alien?

Isn't the burden of determining whether an employee or a potential employee is here legally on the employer?

[MoJo]

The way I see this - yes, you can exclude a group of employees for a variety of reasons (as long as your exclusion does not violate some other law - like age, race, etc.).  The problem with this request is that it BY DEFINITION seeks to exclude a group of employees that IT WAS/IS ILLEGAL TO HIRE/EMPLOY.

Want to put into a document an exclusion of people you shouldn't have hired, and then CONFESS that you did so by actually excluding them in practice (thereby admitting that you KNOW they are employed illegally)?  Yea.  Good luck with that.

[RatherBeGolfing]

2 minutes ago, My 2 cents said:

When the IRS says "resident alien", the term has a specific meaning.  Is it permissible for a pension plan to use a conflicting definition of "resident alien" or must the term encompass someone if and only if the IRS would consider that person a resident alien?

Isn't the burden of determining whether an employee or a potential employee is here legally on the employer?

You are correct, I forgot about the substantial presence test which could include an someone who is not here legally as resident alien for tax purposes.  

I would still avoid the term for plan purposes and use reasonable classification.  

[K2retire]

8 hours ago, Kaizen401k said:

I was advised by a legal professional that one could exclude resident aliens but there needs to be a more specific definition of resident alien.

Are you sure that the legal professional didn't say you could exclude NON-resident aliens?

[RatherBeGolfing]

9 minutes ago, K2retire said:

Are you sure that the legal professional didn't say you could exclude NON-resident aliens?

And they probably also missed the  "with no US income" part

[Kaizen401k]

I'm referring to Resident Aliens under the IRS definition, which simply means they've been here over a year and have some US income. This is not about nationality as there are employees on both the Resident Alien and Citizen side of this that are of the same nationality.

Mojo is on point but I'm surprised nobody has tried to answer the question.

How does this definition sound?

"Exclude any employee who is not a citizen or national of the United States."

By citizen or national, I mean a legally recognized subject or national of the United States owing permanent allegiance to the United States.

Because if they have a valid SSN, they would have to be a citizen or national.

Is this correct?

Thank you.

[Mike Preston]

How is that NOT discriminating on the basis of national origin?

You can't do that, so don't do that.

And that's my opinion until somebody provides me with a citation that says otherwise.

[RatherBeGolfing]

9 minutes ago, Kaizen401k said:

I'm referring to Resident Aliens under the IRS definition, which simply means they've been here over a year and have some US income. This is not about nationality as there are employees on both the Resident Alien and Citizen side of this that are of the same nationality.

Mojo is on point but I'm surprised nobody has tried to answer the question.

How does this definition sound?

"Exclude any employee who is not a citizen or national of the United States."

By citizen or national, I mean a legally recognized subject or national of the United States owing permanent allegiance to the United States.

Because if they have a valid SSN, they would have to be a citizen or national.

Is this correct?

Thank you.

No No No.  You cannot exclude someone based on national origin, period! Excluding someone because they are not a US citizen is excluding based on national origin. Title VII civil rights act ring a bell?

You do not have to be a citizen to have a valid SSN.  Many non-citizens have valid SSNs.  

 

[My 2 cents]

17 minutes ago, Kaizen401k said:

I'm referring to Resident Aliens under the IRS definition, which simply means they've been here over a year and have some US income. This is not about nationality as there are employees on both the Resident Alien and Citizen side of this that are of the same nationality.

Mojo is on point but I'm surprised nobody has tried to answer the question.

How does this definition sound?

"Exclude any employee who is not a citizen or national of the United States."

By citizen or national, I mean a legally recognized subject or national of the United States owing permanent allegiance to the United States.

Because if they have a valid SSN, they would have to be a citizen or national.

Is this correct?

Thank you.

It is my understanding that if someone is authorized to work here in the United States, they can obtain a Social Security Number.  To the best of my knowledge (and I just tried to look this up on a Social Security website), there is no requirement at all involving being a citizen or owing allegiance to the United States.  If they are here to work, they can and should obtain a Social Security Number.  And (as the website pointed out) there is no cost to do so.

[Kaizen401k]

National origin does not matter as long as they are also a national/citizen of the USA.

How about:

"Exclude any employees who have not have a valid SSN or green card in the past year"

OR

"Exclude any illegal aliens."

That is simple and exactly what they want to do but it makes obvious certain things.

My main question is-is there a different wording that can be used for that?

[Kaizen401k]

Duplicate

[MoJo]

47 minutes ago, Mike Preston said:

How is that NOT discriminating on the basis of national origin?

You can't do that, so don't do that.

And that's my opinion until somebody provides me with a citation that says otherwise.

I don't think the line is drawn between those who are of US "national origin" and those who are "not of US national origin" because the line only excludes those who are NOT in this country "legally."  You may actually INCLUDE some people from Mexico who are here LEGALLY and yet exclude those from Mexico who are here ILLEGALLY.  The distinction is not based on national origin AT ALL, but rather on a different criteria..

But, I still think you are confessing to the crime of employing those not in this country legally, and that is a problem....

[GMK]

You can exclude persons who are not authorized to work in the USA.  This would cover cases where the illegality of their presence is learned later.

In any case, I suggest that the employer sign up for e-verify (it's free) and check new hires when they're hired, so the employer knows right away that they are authorized.

[Mike Preston]

Sorry, but I remain steadfast.  You may NOT exclude persons who are not authorized to work in the USA.  If they work, you may not rely on the fact that they are doing so illegally to reduce or eliminate their benefits.  This is well settled.  At least before 1/20/2017.

[MoJo]

1 minute ago, Mike Preston said:

Sorry, but I remain steadfast.  You may NOT exclude persons who are not authorized to work in the USA.  If they work, you may not rely on the fact that they are doing so illegally to reduce or eliminate their benefits.  This is well settled.  At least before 1/20/2017.

I respectfully disagree.  I could LEGALLY draft a plan to exclude all "redheads" - although I'd have a coverage test to perform.  Why couldn't I exclude those not authorized to work in the US?  It isn't a protected group (far from it - THEY AREN'T AUTHORIZED TO WORK HERE - which is what raise the issue I posited above).  There are very distinct protected classes against of people who against whom you may not discriminate against.  Not be authorized to work in this country is NOT a protected group.

[Mike Preston]

Well, if you can find a cite, do so.  My memory tells me there is something out there (from the DOL I think) that makes it clear that you can't.  And if I was engaged by a cient I might even be able to find it. :-)

[My 2 cents]

If they are working in this country, legally or not, then for coverage and non-discrimination testing purposes, they are NOT "excludible".  You must put them in the denominator of the testing fractions, and if there are enough of them, then you will not be able to pass.  You only get to exclude employees NOT working in the United States and NOT receiving any US compensation (non-resident aliens with no US income are the ones who may legitimately be excluded for testing purposes). 

The above presumes that you have no highly compensated employees who are here illegally.  I suppose if you could exclude them, it might help the testing.

As pointed out above, the employer is guilty of a crime if they employ people who are here illegally.  So they ought not to knowingly employ anybody who is here illegally.  If employer claims that they are not employing anyone who is here illegally, what sense does it make to explicitly exclude them from the plan? 

Let us not forget that, whether the employee is here legally or not, the employer MUST pay OASDI taxes on their compensation. 

[Mike Preston]

Clients that want to do this are usually after the funds withheld or contributed on behalf of these individuals before they are deemed ineligible.  Can't be done.

[Kaizen401k]

OASDI taxes are paid by all employees.

Nobody who would be excluded by the new amendment has any funds withheld or contributed on behalf them. This is a proactive measure so it doesn't become a problem in the future.

How do places like McDonalds and Jack-In-the-Box take care of this? 

 

[RatherBeGolfing]

1 hour ago, Kaizen401k said:

OASDI taxes are paid by all employees.

Nobody who would be excluded by the new amendment has any funds withheld or contributed on behalf them. This is a proactive measure so it doesn't become a problem in the future.

How do places like McDonalds and Jack-In-the-Box take care of this? 

 

By not breaking the law...

[Kaizen401k]

It sounds like you've never been to either. Good for you and your health. They hire people who are not authorized to work in USA, which is illegal.

[K2retire]

There is something very ironic about a business trying to find a legal protection for not covering people that they are hiring illegally. 

[Mike Preston]

I'm about to lose it.  This whole discussion is nothing more than an attempt to implement something which is not very thinly veiled discrimination against a class of human beings least able to protect themselves.  I wouldn't entertain a discussion of how to illegally discriminate against those over 40 (or under age 30 for that matter) and I applaud the courts when they bitch-slap political parties for implementing policies which attempt to disenfranchise and/or marginalize a class of voters.

In the vast majority of cases where a business is found guilty of hiring illegal workers most of those illegal workers will have come from a single country.  And if that isn't prohibited discrimination based on national origin I'm a monkey's uncle. Now don't go nibbling around this issue by trying to say that one can pass muster if the illegal population is evenly split between two different countries.  One can't.  Because discrimination against those who are from a country (any country) other than our own is still illegal.

 

[Kaizen401k]

There are people from that country who are both legal and other. The country they're from is irrelevant, whether they are legally authorized to work is relevant. Age is not a factor as long as they're over 18, anyone who is other than legal obviously can't vote so I don't get why your'e bringing that up?

You've done nothing but criticize when all I've asked for is a better definition of how to exclude employees with invalid SSNs without using those exact words. Can you help with that instead of claiming I'm discriminating against immigrants? 

Immigrants made this country great and will continue to do so. I simply want a way to help my client protect themselves from complexities arising from someone who could disappear at any time enrolling in the 401k.

Thank you GMK and Mojo. I believe you've answered the question and I have everything I need to make the amendment. I sincerely appreciate your help.

[MoJo]

On 1/13/2017 at 6:04 PM, My 2 cents said:

If they are working in this country, legally or not, then for coverage and non-discrimination testing purposes, they are NOT "excludible".

Being "included" for testing purposes is different than being excluded from participation.  Yes, unless there is a "statutory" exclusion, they must be included for testing, but in any event, absent a specific "protected" class designation (through some legislation), you can exclude them from participation.  I've not seen undocumented aliens defined as a protected class anywhere....

Bottom line, if you employ them 1) yes, you have to play by the tax collection rules; 2) you are breaking the law; and 3) you can, if you want to admit to item "2)" you can exclude them from participation (at the risk of testing issues).