Employee Leasing Company 401k

Employee Leasing company wants to sponsor a 401(k) for their inhouse employees only. Can they exclude employees leased to other organizations? Are there limitations or testing requirements to consider?

There are many factors to consider here, and you are not likely to get a simple yes/no answer on this board. If the leasing company were my client, I would advise them to have a lawyer make this determination.

If you have access to "Who's the Employer" by S. Derrin Watson, read chapter 4 to get a good understanding of the issues involved and to understand how to go about analyzing the situation.

IRC 414(n), Notice 84-11, and Rev Proc 2002-21 are all required reading for this topic.

If the leasing company excludes all the owners (who are automatically HCE), then they have a better shot at passing coverage tests. If the inhouse employees are all NHCEs, then you can definitely cover just them and automatically pass. We've done similar things for restaurant chains, etc.