Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

Site Manager / Senior Administrator

Nicholas Pension Consultants
(Remote / AZ / ID / NM / NV / UT)

Nicholas Pension Consultants logo

Retirement Plan Relationship Manager – DB or DC Focus

Trinity Pension Consultants
(Remote / Akron OH / AL / IN / KY / MO / TN)

Trinity Pension Consultants logo

Retirement Plan Administrator

CMC Pension Professionals

CMC Pension Professionals logo

Compliance Specialist II



Enrolled Actuary

Loren D. Stark Company

Loren D. Stark Company logo

Retirement Plan Administrator

Hessel & Associates, LLC
(Remote / IL)

Hessel & Associates, LLC logo

Retirement Plan Administrator

Hicks Pension Services

Hicks Pension Services logo

Manager - Defined Contribution Plans

M2B Retirement Consulting LLC
(Remote / Wexford PA)

M2B Retirement Consulting LLC logo

Chief Pension Actuary

Loren D. Stark Company

Loren D. Stark Company logo

Pension Administrator

(Remote / Phoenix AZ)

MGKS logo

Benefits Supervisor

NFL Player Benefit Office
(Baltimore MD)

NFL Player Benefit Office logo

DC Administrator

United Benefit Pensions Inc.
(Remote / Melville NY)

United Benefit Pensions Inc. logo

Junior Implementation Specialist - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Ubiquity Retirement + Savings logo

Compliance Analyst - 401(k) Administration

Ubiquity Retirement + Savings
(Remote / San Francisco CA)

Ubiquity Retirement + Savings logo

Plan Administrator Consultant

Jocelyn Pension Consulting
(Remote / Boulder CO)

Jocelyn Pension Consulting logo

Senior Defined Contribution Account Manager

Nova 401(k) Associates

Nova 401(k) Associates logo

Retirement Plan Administrator

Nicholas Pension Consultants
(Remote / Rancho Cordova CA / Corona CA)

Nicholas Pension Consultants logo

Plan Administrator

Aimpoint Pension
(Remote / Pompano Beach FL)

Aimpoint Pension logo

401(k) Retirement Plan Administrator

Midwest TPA with Remote Workforce
(Remote / Beachwood OH)

Distribution \ Loan Clerk

Retirement, LLC
(Remote / Oklahoma City OK)

Retirement, LLC logo

View More Employee Benefits Jobs

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Adopting a Single Employer PEO Plan After May 13, 2002

(Posted May 13, 2002)

Question 182: I've been approached by a PEO that wants to set up a single employer retirement plan. In light of Rev. Proc. 2002-21, should I do so?

Answer: Absolutely not. Stay as far away from that as you can.

Rev. Proc. 2002-21 is effective for plans in existence May 13, 2002. That means that if a plan was not in existence May 13, 2002, that plan cannot take advantage of its provisions. Thus, it is impossible for such a plan to comply with the Rev. Proc. Even if such a plan were to be terminated or converted to a multiple employer plan before 2004, it would be unable to claim the relief offered by the Rev. Proc.

Even though such a plan would be unable to claim the relief, it would be subject to the consequences of noncompliance-- consequences it will be unable to avoid. It would be subject to disqualification for violating the exclusive benefit rule unless it could prove that it is the common law employer of its Worksite Employees. Moreover, if it were still a single employer plan in 2004, it would be unable to rely on a favorable determination letter, regardless of when that letter was issued.

At this point, the only way a PEO should be considering setting up a retirement plan is to set up a multiple employer plan that is cosponsored by the COs of participating employees. Any other course is fraught with peril.

For further discussion of why these are dangerous waters, see Chapter 4 of my book Who's the Employer. For more on the Rev. Proc., see my expanded coverage, published on the Web.

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.

Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2022, Inc.