Farmer & Betts, Inc.
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Retirement Plan Documents Specialist Loren D. Stark Company
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Retirement, LLC
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Kentucky Trust Company
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Retirement Plan Legal Specialist Pentegra
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RTD Financial Advisors
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Carpenter Morse Group
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EPIC Retirement Plan Services
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Bates & Company
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Plumbers Local Union No. 1 Benefit Funds
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Retirement, LLC
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Employee Benefits and Executive Compensation Associate Attorney Verrill
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Administrator/Consultant (DC and DB) TPA Professionals
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Pentegra
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Employee Benefits & Executive Compensation Associate Attorney Polsinelli PC
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Retirement Plan Relationship Manager ERISA Services, Inc.
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Jr Retirement Plan Administrator/ Administrative Assistant Hochheiser Deutsch & Co, Inc.
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Retirement Plan Administrator (TPA) Retirement Plan Consultants
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Trucker Huss, A Professional Corporation
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EPIC: TPA/DPS
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Nicholas Pension Consultants
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Question 175: Often client companies of PEOs want to continue to maintain their own 401(k) plans. However, the PEO cannot deduct 401(k) contributions to the client company's plan, because deductions under IRC 404 are limited to plans "maintained by the employer," which is not the PEO. Has the IRS considered this issue? |
Answer: Yes they have. And that's why they wrote Rev. Proc. 2002-21. W-2s and paychecks do not an employer make. It is that fundamental point which caused the IRS to issue Rev. Proc. 2002-21 to allow staffing firms a chance for relief from the misguided consequences of trying to sponsor a single employer plan. No staffing firm should lightly disregard that relief or ignore the warning implicit in it. |
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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