Subscribe Now!
Free Daily News, Jobs, Webcasts, Discussions
Post and Distribute
Your Jobs
ARPA Webcasts

Featured Jobs

Retirement Plan Consultant / Relationship Manager

Associated Pension Consultants
(Chico CA / Sacramento CA)

Associated Pension Consultants logo

DB/DC Administrator

Primark Benefits
(Telecommute / Burlingame CA)

Primark Benefits logo

Retirement Plan Administrator

Premier Plan Consultants
(Telecommute / San Diego CA)

Premier Plan Consultants logo

Director of Finance

NYCDC of Carpenters Benefit Funds
(New York NY)

Employee Benefits/Health and Welfare Attorney

Miller Johnson
(Telecommute / Grand Rapids MI / Kalamazoo MI / Detroit MI)

Miller Johnson logo

Manager, 5500 Team

401K Generation
(Altamonte Springs FL)

401K Generation logo

DC Administrator

(Telecommute / Phoenix AZ)

MGKS logo

Defined Benefit Retirement Plan Administrator

Benefit Associates, Inc.
(Telecommute / Huntington Beach CA)

Benefit Associates, Inc. logo

DB Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

Product Support Consultant part of Wolters Kluwer Legal & Regulatory
(Telecommute) part of Wolters Kluwer Legal & Regulatory logo

Director of 401(k) Implementation, Core

Human Interest
(Telecommute / Mill Valley CA)

Human Interest logo

401(k) Implementation Manager

Human Interest
(Telecommute / San Francisco CA)

Human Interest logo

DC Retirement Plan Administrator

The Nolan Company
(Telecommute / Overland Park KS)

The Nolan Company logo

401(k) Consultant

TPS Group
(Telecommute / North Haven CT)

TPS Group logo

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

No Back Office Employees in PEO Multiple Employer Plan

(Posted July 10, 2002)

Question 211: Can a PEO offer a Mulitiple Employer plan to the common law employees of its clients but exclude the PEO's own employees from participation? If the PEO's employees are excluded, how can the PEO sponsor a qualified plan that covers only other employers' employees?

Answer: Yes, it certainly can.

Remember, one of the joys of a multiple employer plan is that if any of the sponsors is the employer (or deemed employer) of the workers, the exclusive benefit rule is satisfied. So, if it is a multiple employer plan, there is nothing to prevent the PEO from being a sponsor, even if it chooses not to have its back office employees participate.

In a multiple employer plan under IRC 413(c), coverage testing is done at the individual employer/sponsor level. When you look at the PEO, you ask how many of its HCEs are participating. Assuming that you've determined that all the worksite employees are common law employees of the CO, then no HCEs of the PEO are participating. Having answered that question, the PEO's portion of the plan automatically passes all coverage and nondiscrimination testing for a defined contribution plan.

Why would the PEO be listed as a sponsor? Because it is running the plan. It will decide when and how the plan will be amended. Its name and address is on the front of the Form 5500. No matter how much its clients might change, the "lead" sponsor of the plan will stay the same, which is how how it should be.

For more on PEO plans, see my web site or Chapter 4 of the forthcoming third edition of my book, Who's the Employer. Multiple employer plans will be discussed in Chapter 18 of the third edition; a summary appears on my web site.

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)

© 2021, Inc.