Small NY Actuarial TPA Firm
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Southern Pension Services
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Definiti
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Quantech Pensions LLC
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Retirement Plan Relationship Manager Prosperity Advisors, LLC
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Advanced Plan Designs, LLC
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Southern Pension Services
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Defined Contribution Plan Administrator Pension Investors Corp of Orlando Inc
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Manager/Supervisor of Benefits and Payroll Compensation Virginia Farm Bureau
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Plan Compliance Analyst (administrator) RPA
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Carpenter Morse Group
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Howard Simon & Associates
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Pension Rights Center
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Question 103: In a previous question you discussed the employment status of illegal aliens, and you mentioned the potential to exclude nonresident aliens. Would you elaborate? I thought illegal aliens could be excluded under that clause. | ||||||
Answer: IRC 410(b)(3)(C) allows a plan to exclude from coverage testing:
In terms of dealing with persons in America illegally, they are considered residents any year in which they spend at least 183 days in the U.S. They may be residents under the substantial presence test even if they haven't spent 183 days in the country during the year in question. That being the case, if a plan uses a standard year of service requirement, the odds are excellent that the workers will be treated as residents by the time that year is over. Being a nonresident alien isn't enough, however, to permit exclusion. The worker must also have no U.S.-source earned income from the employer. That term is defined in the section 410(b) regulations and in IRC 861(a)(3). Basically, if you are being paid for working in the U.S., then you have U.S.-source income unless:
Let's move from illegal aliens and consider folks with green cards. Consider the foreign parent of the U.S. subsidiary which are deemed to be a single employer. Many companies would like, for the sake of simplicity, to exclude everyone on the parent’s payroll, by virtue of the nonresident alien exclusion. However, suppose a manager on the payroll of the parent comes to the U.S. to oversee the sub. He would almost undoubtedly have a green card and hence be a nonexcludable resident. I've had a lot of folks ask if it made a difference whether the parent or the sub paid the manager. IRC 861 doesn't care whether the payments are in yen or dollars, or where the check is written. It matters where the work is done. If the work is done in the U.S., it is generally U.S.-source income. Of course, any U.S. citizens working for the parent cannot be excluded under this provision, regardless of where they are working. So, in counting employees for purposes of section 410(b), you essentially end up counting:
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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.
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