EPIC Retirement Plan Services
|
Carpenter Morse Group
|
EPIC: TPA/DPS
|
Retirement Plan Legal Specialist Pentegra
|
Administrator/Consultant (DC and DB) TPA Professionals
|
Retirement Plan Administrator (TPA) Retirement Plan Consultants
|
Jr Retirement Plan Administrator/ Administrative Assistant Hochheiser Deutsch & Co, Inc.
|
Pentegra
|
Trucker Huss, A Professional Corporation
|
Kentucky Trust Company
|
Retirement Plan Relationship Manager ERISA Services, Inc.
|
Retirement Plan Documents Specialist Loren D. Stark Company
|
RTD Financial Advisors
|
Plumbers Local Union No. 1 Benefit Funds
|
Employee Benefits & Executive Compensation Associate Attorney Polsinelli PC
|
Retirement, LLC
|
Employee Benefits and Executive Compensation Associate Attorney Verrill
|
Retirement, LLC
|
Bates & Company
|
Farmer & Betts, Inc.
|
Nicholas Pension Consultants
|
“BenefitsLink continues to be the most valuable resource we have at the firm.”
-- An attorney subscriber
|
|
Question 153: Recently, the BenefitsLink newsletter has highlighted conflicting articles by the Center for a Changing Workforce and the National Association of Professional Employer Organizations. What's your take on the situation? | |
Answer: PEOs or staffing firms provide a useful service in our economy. The value that the marketplace puts on these services is shown by the millions of workers who are currently on the payroll of such organizations.
In admitting that workers on their payroll are still employees of the companies for which they are providing services, NAPEO has admitted that those workers are not leased employees. The first requirement of leased employee status is that the worker not be a common law employee of the recipient, a requirement NAPEO correctly admits is violated in their arrangements. The Ninth Circuit's Burrey decision makes this point very clearly. Without the 414(n) leased employee rules, there is absolutely nothing in the Internal Revenue Code or any IRS pronouncement that would treat the benefits the PEO provides as being provided by its recipient client for testing purposes. The only way the client can take advantage of those benefits is to cosponsor the plan. And frankly, that may be the only way that the PEO or staffing firm can provide those benefits. Because while there have been many cases asserting that the client recipient is the common law employer of the workers, there has been virtually no case which has held for retirement plan purposes that the PEO is also a common law employer. As for NAPEO's assertion that a "co-employer" relationship exists, the IRS disagrees. GCM 200017041, which I've recently posted on my Resources page, puts the matter very bluntly: "The concept of a 'co-employer' is not recognized in Subtitle C of the Internal Revenue Code." This is why there is a need for legislation to clarify the situation of staffing firms/PEOs. Over the years there have been several proposals, some of which are mentioned in NAPEO's paper. As far as I'm aware, none has gotten out of committee, largely thanks to the opposition of organized labor. But such firms cover an increasingly large segment of the American workforce, and their workers should not be left in a legal limbo. What we have now is a confusing and awkward situation, in which many employers do not realize they are walking into a huge trap. I discuss leasing arrangements and the possibility of dual employer arrangements in a staffing firm or PEO context at length in chapter 4 of my book, Who's the Employer. |
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.
Related links: |