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Who's the Employer?

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

Rev. Proc. 2002-21 and the Separate CO Plan

(Posted May 6, 2002)

Question 171: Does Rev. Proc. 2002-21 have any impact on a division of a company if the company has determined that the employees of the division are common law employees of the company and participate in the company's qualified plan, even though the employees are leased from a PEO?

Answer: No. These folks are doing just what they should be doing and can go ahead without change.

Rev. Proc. 2002-21 affects single employer plans adopted by PEOs. Accordingly, it has ramifications for a sponsoring PEO, for the participants in the PEO's plan, and for the COs for whom those participants perform services.

It does not affect:

Existing multiple employer plans cosponsored by a PEO and by all the COs whose workers participate; or
A CO's plan which (almost undoubtledly correctly) treats the workers as the CO's common law employees and disregards any benefits provided under a PEO plan that the CO does not cosponsor.
A PEO that has chosen not to sponsor a plan.

For additional analysis of this Rev. Proc., see my redesigned site. For more on the status of leased employees, see Chapter 4 of my book, Who's the Employer.

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.