expatriates and coverage

[gregburst]

I've learned that one of my clients has a couple of employees that live and work in Japan. One of them has become a Japanese citizen. I have no info as to whether this person has dual citizenship.

I'm trying to figure out whether these employees should be covered under the 401k plan, which uses fairly standard language in its document (see below). I believe a nonresident citizen should be covered, though I'm not sure. Is it determined by whether the person receives US-based income? And what about the nonresident former citizen? Seems like that person should not be covered.

If anyone has some experience in this area, please shed some light.

Thanks, Greg

 

"Employee": A person who is currently or hereafter employed by the Employer, or by any other employer aggregated under Code sections 414(b), (c), (m), (n), or (o) and the regulations thereunder, including a Leased Employee subject to Code section 414(n) and a self-employed owner of an unincorporated employer, but, unless otherwise provided in the Adoption Agreement, excluding (a) an Employee who is a nonresident alien (within the meaning of Code section 7701(b)(1)(B) deriving no earned income (within the meaning of Code section 911(d)(2)) from the Employer that constitutes income from sources within the United States (within the meaning of Code section 861(a)(3)); and (b) employees who are included in the unit of Employees covered by a collective bargaining agreement between the Employer and employee representatives, provided benefits were the subject of good faith bargaining and 2% or less of the employees of the Employer who are covered pursuant to that agreement are "professional employees" as defined in Treasury Regulations section 1.410(b)-9. For this purpose, the term "employee representatives" does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer.

[Paul I]

The two crucial questions are does the plan include or exclude non-resident aliens? and does this individual receive income from US sources (e.g. is on the US payroll)?

If the plan includes NRAs and this individual is on the US payroll, and they otherwise meet the age, service and entry date requirements of the plan, they are covered by the plan.

[CuseFan]

Agreed. They are only excluded if they are (1) non-resident (live outside US), (2) an alien (non-US citizen, not Martian), (3) not on a US-based payroll AND (4) the plan document/AA excludes such employees.