Retirement Plan Consultant
Cetera Retirement Plan Specialists
Blue Ridge ESOP Associates
(Charlottesville VA / Telecommute)
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|Question 249: Derrin, you appeared with Richard Wickersham of the IRS at the Los Angeles ASPA Benefits Conference in a discussion of Rev. Proc. 2002-21. Did Dick make any comments that would add to our understanding of how the IRS will treat PEOs?|
Answer: I think there were some very important clarifications of the IRS' position. Of course, as with any conference, one must recognize that colloquy at a podium is not a Revenue Ruling. But I believe the informal comments do provide a helpful indication of the direction the IRS is heading.
I'm a generous soul, so I was commending the Service for coming up with a creative solution that allows PEOs to "come in from the cold" without penalizing plan participants. Mr. Wickersham was far more pragmatic, explaining that the government simply did not have the resources to deal with this in a heavy-handed manner. In fact, he said that he hoped more enforcement would come from banks and other lenders refusing to extend credit to noncomplying PEOs than from having auditors track them down. I appreciate such pragmatism because it provides a solid, reliable footing for understanding the revenue procedure (and it doesn't disturb anyone's fondly held views that the IRS is not a charitable institution).
I regret to say that I was unsuccessful in pinning down Mr. Wickersham on a definition of the most important term of the revenue procedure: "PEO." He said, in effect, that if the ruling had provided a definition, it only would have inspired further questions. As he said that, I couldn't help but think of a sign from one of my favorite television series of all time, The Prisoner: "Questions are a burden for others; answers a prison for oneself."
Notwithstanding that, Mr. Wickersham seems to be working from a more limited definition of PEO than mine. Although he refused to define specifically a PEO, he did describe it as a business that primarily takes over all or virtually all the employees of a recipient-- in effect, to be the recipient's outsourced HR department. I know of several staffing firms who will be relieved to hear about that more limited definition.
Because we are now less than 3 months from the date that most PEOs will be making their decisions as to how to proceed under the revenue procedure, these are important clarifications. Of course, for a complete discussion of the revenue procedure, see chapter 4 of my book, Who's the Employer.
And, Mr. Wickersham, in case this column should cross your desk, if I have inadvertantly misstated any of your positions, either here or on my web site, please accept my apologies and let me know so I can set it right.
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