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|Question 198: What impact will Rev. Proc. 2002-21 have on entities that are not necessarily labeled a PEO? My example is a hospital that leases employees to various employers within the community, and continues to cover the employees under the hospital's retirement plans (a m0oney purchase pension and a 401(k) plan). Can Rev. Proc. 2002-21 be applied in this situation?|
Answer: In a word, yes. But that conclusion is anything but certain.
But I spoke to the author of the Rev. Proc. (Jeanne Royal Singley) several weeks ago. She believes Section 6.05 of the Rev. Proc. defines PEO, albeit indirectly and operationally. That section says:
When she said this, I believe I immediately started to ask about a hospital as a PEO. She said that the Service is aware of the issue. Earlier in our conversation, she indicated that the IRS is considering issuing additional guidance clarifying some issues in the Rev. Proc., and we can only hope this issue is one of the points they will address.
Of course, Ms. Singley graciously responding to my questions does not constitute an official position of the IRS and it is binding on nobody. But the conversation shows that the Rev. Proc. might well have a broader sweep than many people realized at first.
Notwithstanding the foregoing, I have lately concluded that the IRS will likely not enforce the Rev. Proc. against hospitals and similar entities. Click here for my analysis
Also, you can review detailed coverage of the Rev. Proc. at my web site.
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.