Life Insurance Salesman as Statutory Employee

[TPA Bob]

I have a life insurance salesman who has a significant part of his revenue paid to him as a statutory employee and is covered by the insurance company's retirement plans.  Additionally he has other commissioned income that is not considered statutory income by the payers.

In addition he has his own employee that he pays W-2 compensation.

He wants to establish a separate retirement plan covering his non statutory income and the employees income.

I have not been able to find anything definitive.  Would seem for retirement plan purposes he could establish a Plan for his non statutory income and that of his employee.

Any thoughts greatly appreciated.

[Mike Preston]

Been there, done that.  Do it.

[MoJo]

40 minutes ago, Mike Preston said:

Been there, done that.  Do it.

I would only add "carefully" - lots of details....

[TPA Bob]

MoJo

Not certain what "carefully" means.  My only concern is if he receives income from life insurance sales that have not been subjected to the "statutory" employee rules and thus earned income (and would have to pay self employment tax) is this income  available for a separate plan?  One of things that keeps coming up in reading the rules.

[MoJo]

Carefully simply means drawing a bright line between income sources and "playing by the rules" with respect to his own business (business formality, etc.) to ensure no complications.  I was involved in a similar situation that required an (expensive) accountant to sort out in the face of  an IRS audit.  That "agent" sold certain lines as an employee,  but sold other lines from the same insurer as an independent.  The IRS challenged whether the "commissions" he received from the "independent" side was actually comp from the insurer as an employer, and not income to the side business.  It didn't help that he commingled funds and didn't maintain good records.

Otherwise, I do this all the time (but usually with respect to very different "businesses," a doctor who runs some non-medical business on the side, etc.)).

[TPA Bob]

Thanks very much MoJo.