US Citizens Working for Foreign Entity

[OrderOfOps]

Our client is the US subsidiary entity of a European company. The US entity is the Plan Sponsor, and the EU entity is not a participating employer. My understanding is that the EU entity + US entity consist of a controlled group or ASG, since the US entity is 100% owned by the EU entity, and the two coordinate on the same business purposes.

They recently informed us that they will be hiring a US citizen who will be working & living in the EU country.

If the person is working for an EU entity that is an non-adopting affiliated employer, do they have to be considered in the coverage testing for the Plan? Additionally, is their foreign income Plan Compensation, even if it's not reported on a W-2? Derrin Watson/ERISApedia seems to say so (Q 20:16 Who's the Employer)

[CuseFan]

If plan supports and person is not employed by a participating employer within control group, they are excluded. However, if US citizen they are not statutorily excluded and must be included in coverage testing. I assume their foreign paid income would be considered, but the only implication would be for HCE determination.

[Artie M]

I don't have time to look for authorities but I believe the person would be included for testing purposes as an NHCE that does not benefit.  They receive no W-2 Plan comp and have no deferrals.  All the nonresident aliens with no US source... the other employees of the EU entity... would be excluded for all purposes TR 1.410(b)-6(c).