How to perform ADP test for multiple employer plan sponsored by a leas

[MR]

We have a leasing organization client that sponsors a multiple employer plan with several separate organizations adopting the plan. The research we have done tells us that the recipient employers that have adopted this plan must be tested for non-discrimination separately. The recipient employers must include the leased employees that are employed at their site in their individual ADP tests. The one question that we can't answer is whether the leasing organization must also include ALL of the leased employees in their test as well. In other words, the leased employees would be counted in two tests, one for their respective recipient employer and one for the leasing organization. Can anyone answer this or at least point us to a website or reference that can?

[alanm]

You do not include the employees of the worksite employers adopting the master leasing company plan in the test for

the internal employees of the leasing company. The double testing arose when the leasing company(PEO) sponsored a single employer plan and included all worksite employees in one test. If 50% of the worksite employees were eligible to be in the plan, the worksite should aggregately test those employees with any other plan the worksite employer may sponsor. Therefore, in that case, you would have double testing of employees. Not many PEOs that sponsored single employer plans took this conservative approach, but there are IRS and PWBA opinions and other guidance stating their position is that the worksite employer is the common law employer despite the "Leasing label". Look at PWBA opinion

92-07A for clarification.