United 401(k) Plans, Inc.
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Trucker Huss, A Professional Corporation
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Retirement Plan Relationship Manager ERISA Services, Inc.
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Prime Pensions, Inc.
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Central Pension Fund of the IUOE
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Nicholas Pension Consultants
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Compass Retirement Consulting Group, Inc.
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Carpenter Morse Group
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Nova 401(k) Associates
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Bates & Company
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Retirement, LLC
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Defined Benefit Calculation Specialist/Actuary The Angell Pension Group, Inc.
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Retirement Plan Legal Specialist Pentegra
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Central Pension Fund of the IUOE
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Question 24: Employer A and Employer B are not part of the same controlled group or affiliated service group. However, Employer B's management employees are paid through Employer A's payroll and are covered under Employer B's retirement plan. These expenses are then charged back to Employer B. Employer B's remaining employees are paid through its own payroll and covered under its own retirement plan. Do you agree that: (1) Employer B's management employees must be covered under its own retirement plan unless the plan specifically excludes them or allows them to waive participation; (2) Employer A's plan may have a compliance problem by covering employees of an unrelated employer (assuming the plan is silent in this regard); and (3) the existence of a common payroll is not determinative of who is the "employer." |
Answer: Let's take question (3) first. Who writes the paycheck does not determine, for qualified plan purposes, who is the employer. If it did, staffing firms would be breathing a lot easier! Instead, employer/employee status is determined by reference to the various control tests outline in Rev Proc 87-21, various court decisions, and the IRS audit guidelines. For more specifics on the tests involved, see Chapter 2 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.
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