Federal Work Study Students and 401k Plan

[52626]

Are federal work study students considered "employees" and eligible to join the 401(k) Plan?  The document does not specifically exclude this group.

These individuals while they are working for the employer are "students" and are not eligible for any benefits offered by the employer.  I am trying to locate some regulation/guideline that provides these individual are not considered employees for purposes of the plan.

Thank you.

 

[Madison71]

Do they receive a W-2?  I believe they are considered a W-2 employee eligible to participate in the plan (if meet whatever age and service requirements) unless specifically excluded.     

[rr_sphr]

I'm going to point you to a document : https://ifap.ed.gov/fsahandbook/attachments/1213FSAHbkVol6Ch2.pdf about benefits and  Federal work study wages (I quickly used the "find"  option to look for the word "benefits") rather than going from the plan document side.  It is the closest I could find that brings up benefits and it does state that no part of the federal wages can be used for retirement benefits. -- i remember this from reviewing it years ago...

[Belgarath]

I'm not sure the answer above is applicable - as I read it on a quick skim, it says that the Federal share of the work study funds cannot be used to provide benefits. So it can't be used to fund employer contributions to the plan, or for FICA, etc., etc.

However, I don't think it means that the employer is exempt from covering employees who must otherwise be covered. Just that any contributions must be employer contributions, and not utilizing the Federal funds provided to the work-study program.

Just an off-the-cuff impression FWIW - I don't have time to look into this in greater detail.

[Kevin C]

The only reg I can think of that addresses work-study students is the 403(b) reg listing of special types of excludible employees, see 1.403(b)-5(b)(4)(ii)(D). 

If the sponsor wants them excluded from the plan, I would suggest the plan be amended to specifically exclude them.

[Belgarath]

And even though that allows certain student employee exclusions, it then leads you off to IRC 3121, etc. - haven't looked at it for a while, but it is a delightful stroll through a garbage dump...