Subscribe (Free) to
Daily or Weekly Newsletters
Post a Job

Featured Jobs

Retirement Plan Administrator

The Nolan Company
(Remote)

The Nolan Company logo

ESOP Administrator

Blue Ridge ESOP Associates
(Remote)

Blue Ridge ESOP Associates logo

Retirement Plan Administrator

Nicholas Pension Consultants
(Remote)

Nicholas Pension Consultants logo

Quality Control Specialist

Pentegra
(West Harrison NY)

Pentegra logo

Retirement Plan Administrator

PPG Retirement Plan Services, Ltd.
(Remote / Kenosha WI)

Defined Contribution Consultant

AimPoint Group
(Remote)

AimPoint Group logo

Associate General Counsel

Central Pension Fund of the IUOE
(Washington DC)

Senior Defined Benefits Consultant

Loren D. Stark Company
(Remote)

Loren D. Stark Company logo

Experienced Retirement Plan Administrator

Karel-Gordon & Associates
(Remote / Deerfield IL)

Karel-Gordon & Associates logo

Client Service Specialist

EPIC Retirement Plan Services
(Remote / AL / AZ / CO / CT / FL / GA / IA / IL / IN / MA / MD / ME / MI / MN / MO / NC / NE / NH / NV / NY / PA / SC / TN / TX / UT / VA / VT / WI / WY)

EPIC Retirement Plan Services logo

In-house Counsel, Legislative and Regulatory Advisor

Cheiron, Inc.
(Mc Lean VA / Charlotte NC / Chicago IL / CA / MD / NJ / NY / PA)

Cheiron, Inc. logo

Documents and Operations Coordinator

Jordan & Associates Retirement Services
(Remote / Santa Rosa CA)

Jordan & Associates Retirement Services logo

Defined Benefit Consultant

AimPoint Group
(Remote)

AimPoint Group logo

Plan Document Specialist

The Ryding Company
(Remote / CA / HI / NC / NY / PA / TX / UT)

The Ryding Company logo

Compliance Specialist II

EPIC Retirement Plan Services
(Remote / AL / AZ / CO / CT / FL / GA / IA / IL / IN / MA / MD / ME / MI / MN / MO / NC / NE / NH / NV / NY / PA / SC / TN / TX / UT / VA / VT / WI / WY)

EPIC Retirement Plan Services logo

View More Employee Benefits Jobs

Free Newsletters

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon

BenefitsLink > Q&A Columns >

Who's the Employer?

Answers are provided by S. Derrin Watson, JD, APM

Statutory Employees

(Posted May 17, 2000)

Question 49: Can a statutory employee have his or her own retirement plan?

Answer: With one exception, the answer is yes.

By definition, statutory employees are persons who are not common-law employees of the business they serve. They must meet several specific code requirements, such as performing substantially all the work themselves, not having a substantial investment in facilities, having a continuing relationship with the company, and falling into one of 4 categories: agent-driver, full-time life insurance salesperson, home worker, or traveling or city salesperson. The law requires businesses to withhold FICA taxes from statutory employees, but not income taxes.

Because they are not common-law employees, statutory employees are not eligible to participate in plans sponsored by the company that pays them. To cover them would violate the exclusive benefit rule of the Internal Revenue Code.

Although statutory employees receive a Form W-2, the income reported there is trade or business income that should be reported on Schedule C, against which any expenses of the statutory employee's business are deducted. After all, because they are not common-law employees, they are independent contractors.

As such, they have "earned income" and are regarded as "self employed individuals" under Code section 401(c)(1). This allows them to set up their own retirement plans.

There is one exception. Code section 7701(a)(20) says that full time life insurance salespersons are deemed to be employed by the insurance company whose policies they sell for retirement and health plan purposes. This means

  1. they can be covered under the insurance company plan; and
  2. they cannot set up their own plan.
For a complete discussion of statutory employees, with numerous examples, see chapter 3 of my book, Who's the Employer?.


Important notice:

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.


Copyright 1999-2017 S. Derrin Watson
Related links:

(restricted access)

(restricted access)

© 2022 BenefitsLink.com, Inc.