Joint Employer Status allows for single employer plan?

I have an employer who states they have joint employer status with their employees, but almost all the employees are directly employed by other entities. No controlled group exists between the entities, but they are claiming a controlled group isn't necessary for these employees to participate in their plan.

Has anyone encountered such a scenario? How do you set up the plan document this way when it seems like the IRS and DOL conflict?

Are you talking about shared employees, where, say, two docs share a receptionist?  And you want to allow participation in one plan?  It's not really clear what is going on here - who is paying whom, for instance.

Its more like a rental property manager who manages apartment complexes for different businesses. The property manager hires and fires, controls where the employees work and what they do, but the employees are issued W2s from the business entities that are being managed.

You don't have a single employer plan. If you are talking about a dc plan, you have a MEP and that's likely OK, though you need to treat each w-2 employer separately. If you are talking HW benefits, you probably have a MEWA, and if that's the case, things can get very ugly, particularly if the plan is self-insured.

It's that point I'm finding myself confused on, only the management company is sponsoring the plan. The DOL recognizes an employee based on common law principles so how can one argue that those employees are not common law employees of the management company? Even the EOB seems to suggest there is such a thing as a shared employee relationship. The 414(o) statute used to have proposed regulations dealing with shared employees.

If someone can show me anything where the employees are not employees of the management company and thus should be a multiple employer plan I would be greatly appreciative.

I had a similar question that I posted and couldn't find an answer to. That said, I think Alonzo might be correct, if you take a moment to think about some of the complications that exist if what you are saying is true. How would you treat wages paid to employees by the managed entity from the viewpoint of the management company's retirement plan if the plan was a single employer plan?

On 4/1/2021 at 5:20 PM, AbsolutelyOkayPossibly said:

It's that point I'm finding myself confused on, only the management company is sponsoring the plan. The DOL recognizes an employee based on common law principles so how can one argue that those employees are not common law employees of the management company? Even the EOB seems to suggest there is such a thing as a shared employee relationship. The 414(o) statute used to have proposed regulations dealing with shared employees.

If someone can show me anything where the employees are not employees of the management company and thus should be a multiple employer plan I would be greatly appreciative.

Just thinking out loud here - but if they are employees of the management company (and the common law test may actually so show), what compensation do they have from THAT employer that allows them to participate in THAT employer's plan?

A good rule of thumb is that the w-2 employer is the employer for ERISA/401(a) purposes. If you follow that, you should survive an audit.

Sometimes, you can use the controlled group rules or the affiliated service group rules to create a single employer. That does not appear to be the case here.