Who's the Employer?

Answer: There is no difference other than a difference in perspective. But that difference is critical to understanding the relationship between the leased employee rules of IRC 414(n) and the PEO rules of Rev. Proc. 2002-21.

The leased employee rules affect the leased employee and the recipient organization (the organization receiving the individual's services). Those rules say that the recipient must treat the leased employee as its employee for many qualified plan purposes and welfare plan purposes. The leased employee rules do not affect the leasing organization at all. The focus is on the worker, and hence the organization for which the worker provides services is the “recipient” of those services.

By contrast, Rev. Proc. 2002-21 affects the PEO. It only indirectly affects worksite employees or Client Organizations. Because the focus of the Rev. Proc. is the PEO, the organization for which it is providing workers is the "Client Organization".

For more about the leased employee rules, see Chapter 4 of my book "Who's the Employer." For more about Rev. Proc. 2002-21, click here for a detailed analysis.

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