Chapter 1: Plans Covering More Than One ER And Leased EEs Flashcards
1
Q
Who is considered a recipient in this context?
A
An organization that receives services from leased employees provided by a leasing organization.
2
Q
True or False: Single-employer plans are the most common types of retirement programs.
A
True.
3
Q
Fill in the blank: The SECURE Act created the _______ for the first time in 2021.
A
[Pooled Employer Plan]
4
Q
What happens when a recipient organization ‘fires’ its employees to lease them?
A
These individuals become employees of the leasing organization.
5
Q
Fill in the blank: Leased employees work at the recipient organization in the same way as _______ work for their employer.
A
[the recipient organizations’ employees]
6
Q
What type of organizations typically use leased employees?
A
Doctors’ offices, law firms, and other businesses.
7
Q
What is important to know about leased employees?
A
It is important to know the appropriate way to treat leased employees for retirement plan purposes.
8
Q
Can more than one employer participate in a single retirement plan?
A
Yes, more than one employer can participate in one plan.
9
Q
What characterizes a MEP with ERISAas a single-employer plan?
A
A plan is considered a single-employer plan if the employers are sufficiently related.
10
Q
What is a multiple employer plan (MEP)?
A
A plan adopted by two or more employers where at least two are not members of the same related group.
11
Q
What are the IRC sections related to multiple employer plans?
A
IRC §§414(b), (c), (m), or (o).
12
Q
What does ERISA require in order to establish a traditional MEPs?
A
The plan must be maintained by a bona fide group or association of employers.
13
Q
What are ‘open MEPs’?
A
Plans maintained by employers without a common bond or nexus.
14
Q
How are open MEPs treated differently from traditional MEPs?
A
They are treated differently when preparing the Form 5500 and annual plan audit.
15
Q
What is a Pooled Employer Plan (PEP)?
A
An arrangement where many employers adopt the same plan without any relationship to each other.
16
Q
What type of plan is a PEP considered?
A
A type of Multiple Employer Plan (MEP).
17
Q
What are two primary barriers to maintaining MEPs that do not qualify as a PEP?
A
The ‘one bad apple rule’ and separate plan treatment under ERISA, requiring separate 5500s & possibly separate plan audits.
18
Q
What is the ‘one bad apple rule’?
A
A rule that affects the qualification of MEPs based on one employer’s noncompliance.
19
Q
What is required for each employer in a non-PEP MEP?
A
A separate Form 5500 and potentially a separate plan audit.
20
Q
What legislation created the Pooled Employer Plan (PEP)?
A
The SECURE Act.
21
Q
When did the Pooled Employer Plan (PEP) become effective?
A
As of 2021.
22
Q
If the covered employees are unionized, the plan may be a?
A
Multiemployer Plan
23
Q
When did PEP rules go into effect?
A
Plan years beginning after December 31, 2020
24
Q
Describe the unified plan rule, a.k.a. one bad apple rule:
A
If one of the participating employers has a compliance problem the IRS could disqualify the entire plan (MEP)
25
Do PEP’s have to abide by the unified plan rule?
The one bad Apple rule does not apply to PEP’s
26
While the Internal Revenue Code considers MEP’s to be a single plan under ERISA, these are considered to be________ plans which require?
Separate plans, separate form 5500s
27
An arrangement where employers have little or no connection with each other is considered?
An open MEP
28
What type of MEP is considered a single by ERISA?
A PEP
29
What is required for a plan to be considered a PEP (eight items)
1) Pooled Plan Provider acting as fiduciary
2) employer is investment fiduciary
3) designate a named fiduciary other than the employer to be responsible for plant administration
4) employer is fiduciary for purposes of selection and oversight of PPP
5) no one, reasonable fees, restrictions, or penalties to ceasing participation, or receiving distributions
6) PPP provides mandated disclosures
7) only reasonable costs are imposed
30
413 C allows what?
Employers in a multiple employer plan, including a PEP to be treated a single employer, even though these employers are not related
31
How is service aggregated for participants in a PEP?
Service with all participating employers is counted in determining an employee’s eligibility
32
What does the exclusive benefit rule permit with regards to employer contributions, and forfeitures in the PEP?
It allows for an allocation of said funds across company lines without violating the rule that an employers contributions must be made for the benefit of its employees
33
Is vesting aggregated across all employers inside of a PEP?
Yes, unrelated participating employers are treated as if together they constitute a single employer for vesting purposes. Service with all of the participating employers is counted in determining an employee’s position on the vesting schedule.
34
Is the 415 limit aggregated across all accounts in a multiple employer plan?
Yes, this includes compensation from all employers as well as annual additions and the plan
35
What is required along with the single 5500 for a pool employer plan?
An attachment, identifying, each participating employer, and an estimate of each employers percentage of total contributions – employee and employer
36
In a pool employer, plan or multiple employer plan what testing items are treated separately for other purposes?
Coverage, non-discrimination, top heavy testing
37
If a multiple employer plan is a pension plan minimum funding is determined how?
As if each participating employer maintained a separate plan-exceptions apply for plans established before 1/1/1989.
38
What is a reason employers may participate in a multiple employer plan?
Business relationship or common ownership among participating employers
## Footnote
Even if employers do not satisfy related employer definitions, they can still participate.
39
What is a major benefit for employers participating in a pooled employer plan?
Economies of scale
## Footnote
Employers share expenses and mitigate liability risks.
40
What is a characteristic of employees who work for employers who adopt a multiple employer plan?
What benefit does a MEP for such a worker present?
They may be in the same industry and have employees that shift employment between them
## Footnote
This provides uninterrupted career-long retirement benefits.
41
What is a leasing organization?
A company that employs individuals and leases their services to other companies
## Footnote
The companies receiving the services are known as recipient organizations.
42
How might a multiple employer plan be maintained in relation to leasing organizations?
Jointly by a leasing organization and its recipient organizations
## Footnote
This coordination aids in contributions and nondiscrimination testing.
43
What is an alternative to the multiple employer plan approach?
Coordinating provisions in separate plans
## Footnote
Plans may credit service for vesting or arrange for benefit transfers.
44
Fill in the blank: A multiple employer plan allows employers to share the _______ of maintaining the plan.
expense
45
True or False: Employers in a pooled employer plan must have a common ownership.
False
## Footnote
There is no relationship or ownership necessary for participation.
46
What is a multiemployer plan?
A plan maintained pursuant to one or more collective bargaining agreements to which more than one employer is required to contribute.
47
What section of the Taft-Hartley Act requires a joint board of trustees for multiemployer plans?
Section 302(c)(5)
48
How are participating employers treated under IRC §413(b) in a multiemployer plan?
As a single-employer for certain purposes.
49
What must be applied as if all employees of participating employers constitute a single-employer?
Minimum age and service requirements under IRC §410(a) and minimum coverage requirements under §410(b).
50
How is service counted for employee eligibility in a multiemployer plan?
Service with all participating employers is counted.
51
Fill in the blank: The portion of the multiemployer plan covering nonunion employees must be _______ from the portion covering union employees.
disaggregated
52
How does nondiscrimination testing under IRC §401(a)(4) apply to in multiemployer plans?
Employers who use Plans subject to the same allocation formula and whose employees are party to collective bargaining agreements, are treated as if they are in a single plan.
53
True or False: A plan that covers only union employees satisfies the nondiscrimination rules of IRC §401(a)(4).
True
54
What happens if an individual is a union employee for part of the year regarding coverage purposes?
He or she may be treated as a union employee for coverage purposes if certain conditions apply.
55
What must be tested for nondiscrimination in relation to union and non-union employees?
The portion covering union employees, and the portion covering the non-union employees.
56
What is the Exclusive Benefit Rule under IRC §401(a)?
The plan must be for the exclusive benefit of employees and their beneficiaries, considering all plan participants as employees.
57
How is vesting applied under IRC §411 for collective-bargaining agreements?
As if all employers were a single-employer, with hours worked aggregated for computing service hours.
58
What is the significance of IRC §412 in relation to pension plans?
It provides minimum funding standards as if all participants were employed by a single-employer.
59
How are deduction limits applied according to IRC §412?
They are applied as if all participants in the plan were employed by a single-employer.
60
What is the purpose of IRC §415 limits?
To apply limits to participant's accounts, compensation, and contributions from all employers in the plan.
61
Fill in the blank: Compensation from all participating employers is aggregated to determine the participant's _______.
IRC §415(c) limit.
62
What is the filing requirement for a multiemployer plan regarding Form 5500?
Only one Form 5500 is filed each year, regardless of the number of contributing employers.
63
True or False: All hours worked by an employee in a collective-bargaining agreement are considered separately by each employer.
False.
64
What must be included in the required aggregation group for a collectively-bargained plan?
A key employee of an employer
65
If no key employee is covered by a union plan, what can happen to the plan?
It may be permissively aggregated with plans in the required aggregation group
66
Do the minimum benefit requirements under IRC §416(b) apply to a union employee covered by a top-heavy plan?
No, they do not have to be applied
67
Define a multiemployer plan according to ERISA §3(37)
A plan to which more than one employer is required to contribute, maintained pursuant to collective bargaining agreements, and satisfies other DOL requirements
68
What does DOL Reg. §2510.3-37(c) require for a multiemployer plan?
The plan must be established for a substantial business purpose
69
What industries typically adopt multiemployer plans due to high worker mobility?
Industries such as construction
70
What is a characteristic of companies that may adopt multiemployer plans?
They may be too small to justify single-employer plans
71
Fill in the blank: A multiemployer plan is maintained pursuant to one or more _______.
[collective bargaining agreements]
72
True or False: A multiemployer plan can cover only a particular trade or craft.
True
73
What are common manufacturing industries that utilize multiemployer plans?
Food, textiles, garment industry, printing and publishing, leather products, lumber and wood products, furniture and fixtures, metalworking
74
Name some nonmanufacturing industries that also have multiemployer plans.
Mining, construction, transportation, wholesale and retail trades, services, entertainment, communications
75
What is a leased employee?
What IRC is a qualified plan benefit allowed, which avoids a violation of the Exclusive Benefit Rule?
An individual who is not a common law employee of the recipient organization but is treated as such under IRC §414(n)(1) for qualified plan purposes
76
List the 4 conditions that must be met for an individual to be treated as a leased employee under IRC §414(n).
* The leasing organization must be the common law ER
* Services must be provided under an agreement between the LO and the R
* The individual must provide services on a substantially full-time basis for at least one year
* R must have primary direction or control over the individual's services
77
True or False: A leased employee is a common law employee of the recipient organization.
False
78
What is a threshold requirement for treating an individual as a leased employee under IRC §414(n)?
The individual must be the common law employee of the leasing organization
79
What must the recipient organization have over the individual providing services to be classified as a leased employee?
Primary direction or control
80
Fill in the blank: A leased employee must provide services on a substantially _______ basis for at least one year.
full-time
81
What must the court determine before deciding if plaintiffs are excludable as leased employees?
The court must determine that they are actually the common law employees of the leasing organization.
82
In cases where leased employees constitute all or substantially all of a recipient's workforce, what issue may arise?
There may be an issue as to whether some or all of the leased employees are actually the common law employees of the recipient.
83
What should a recipient do if they are unsure about the employment status of individuals providing services?
It would be in the recipient's best interest to obtain appropriate counsel regarding the status of these individuals.
84
What happens if the purported leasing organization is not actually the common law employer?
A plan maintained by that organization for the benefit of the recipient's employees is not a qualified plan.
85
What risk does the tax-deferred status of benefits face if corrective steps are not taken according to Revenue Procedure 2002-21?
The tax-deferred status of those benefits is in jeopardy.
86
Under what condition can leased employees be covered in the leasing organization's plan?
The leased employee must be the common law employee of the leasing organization.
87
In a leasing situation, what could the LO do that violates the exclusive benefit rule under IRC §401(a)(2)?
If the leasing organization covers individuals who are not really its common law employees in its plan.
88
What must be present for the services provided to qualify as leasing services?
The services must be performed under an agreement between the recipient and a leasing organization.
89
Can the agreement between the leasing organization and the recipient be informal?
Yes, the agreement can be written or informal.
90
What question arises when a common law employee of one organization provides services to another organization?
Whether there is a leasing situation.
91
What is the minimum number of hours for substantially full-time service in a 12-month period?
1,500 hours
## Footnote
Alternatively, 75 percent of the customary hours in that job position if less than 1,500 hours.
92
How long must an individual's services be performed to satisfy the substantially full-time service rule?
At least one year
93
If a leased employee previously worked as a common law employee for the recipient, how is that service counted?
It is taken into account to determine if the one-year substantially full-time service rule is satisfied.
94
How many times does the one-year substantially full-time service rule need to be satisfied for future plan years?
Once
95
In the example provided, why does Employee M satisfy the substantially full-time service requirement as a leased employee?
Because the prior service as a common law employee of Corporation X is counted.
96
What is required for the recipient employer regarding the services rendered by the individual?
Primary direction or control
97
Name one factor that determines who has primary direction or control.
When, where, and how the individual is to perform services
98
True or False: It is relevant whether the recipient employer has the right to hire or fire the individual.
False
99
What might indicate that a leased employee is actually a common law employee of the recipient?
If the recipient has the right to hire or fire
100
According to the Conference Report to the SBJPA, which types of personnel typically satisfy the recipient organization requirement?
* Secretaries
* Receptionists
* Word processing personnel
* Nurses in a doctor's office
101
What distinguishes professionals from other types of personnel regarding control by the recipient employer?
Professionals regularly make use of their own judgment and discretion on matters.
102
What is the treatment of a leased employee after the one-year qualifying period?
The individual is treated as an employee of the recipient for eligibility and vesting purposes, and all service during the qualifying period is credited.
103
What happens if a leased employee was formerly an employee of the recipient?
Services performed as the recipient's common law employee are also counted for plan purposes.
104
For which qualification requirements is a leased employee treated as an employee?
* Nondiscrimination tests under IRC §§401(a)(4), 401(k), and 401(m)
* Eligibility rules under IRC §410(a)
* Vesting rules under IRC §411
* Coverage tests under IRC §410(b)
* Compensation dollar limit under IRC §401(a)(17)
* IRC §415 limitations
* Top-heavy rules under IRC §416
105
True or False: Leased employees are treated as employees for the highly compensated employee (HCE) determination.
True
106
What does IRC §414(n) not cross-reference?
IRC §409(I)
107
What is the IRS's view on leased employees participating in an ESOP?
Leased employees may not participate in an employee stock ownership plan (ESOP) maintained by the recipient organization.
108
Fill in the blank: Allocations of contributions to a defined contribution plan are treated as provided by the ______ if attributable to services performed for the recipient.
[recipient]
109
What is the effect of contributions and benefits under the leasing organization's plan which are paid by the Recipient?
They are treated as provided by the recipient if attributable to services performed for the recipient.
110
How does Corporation X treat the 3% contribution from LO's plan?
As if it were provided by Corporation X
## Footnote
This is relevant when determining if Corporation X's qualified plan meets qualification requirements.
111
If a leased employee provides services to multiple recipients, what must each recipient consider?
Only the contributions or benefits attributable to the services performed for that recipient
## Footnote
Recipients cannot aggregate contributions across different employers.
112
Does including leased employees in a qualified plan violate the exclusive benefit rule?
No
## Footnote
The IRS acknowledges this in Notice 84-11, allowing leased employees to be included without violating the rule.
113
What is the significance of IRC §414(n)(3) in relation to the exclusive benefit rule?
It does not reference the exclusive benefit rule but is mentioned in IRS guidance
## Footnote
This indicates the inclusion of leased employees is permissible.
114
What can not be exceeded, which allows a recipient to be able to deduct contributions made on behalf of leased employees?
If the deduction limits under IRC §404 are not exceeded
## Footnote
This applies only to contributions actually made by the recipient.
115
Who claims the qualified plan deductions for contributions made by the leasing organization?
The leasing organization
## Footnote
This is because they are the common law employer of the leased employees.
116
What economic consequence does the recipient bear regarding contributions made to a plan by a leasing organization?
It will be factored into the fees paid by the recipient to the leasing organization
## Footnote
This impacts the overall cost of leasing employees.
117
What must the recipient consider regarding defined contribution plan allocations funded by the leasing organization?
They should take them into account to determine if qualification requirements are satisfied under IRC §414(n)(3)
## Footnote
This ensures compliance with retirement plan regulations.
118
What happens if the leasing organization's plan does not cover the leased employees?
The recipient may need to make and deduct additional contributions to its own plan(s)
## Footnote
This is necessary to satisfy coverage and nondiscrimination tests.
119
What is the benefit of leased employees for the recipient employer?
To pass the coverage and nondiscrimination testing.
120
What happens if the recipient employer does not maintain a qualified plan?
Leased employees are covered only by a plan maintained by the leasing organization.
121
If leased employees are HCEs with respect to the recipient, what must be performed?
Appropriate coverage and nondiscrimination tests at the recipient level.
122
What must be performed if leased employees are key employees with respect to the recipient?
Top-heavy testing at the recipient level.
123
What records must the recipient keep regarding leased employees?
Records to determine the service earned by the leased employees.
124
What is the purpose of keeping records for leased employees?
To give appropriate service credits if a qualified plan is later established.
125
What is the safe harbor plan exception?
It allows the recipient to avoid treating leased employees as its own employees.
126
What requirements must be met for a safe harbor arrangement between a Rec plan and the Leasing Org?
A money purchase pension plan with:
* 10% (non-integrated) contribution rate of IRC §415 comp
* immediate vesting
* Immediate participation (no age or service requirement)
127
What employees are excluded from the safe harbor plan requirements?
Employees who perform substantially all services for the leasing organization or earn less than $1,000 in compensation each year from the leasing organization.
128
What is the maximum percentage of nonhighly compensated workforce that can consist of leased employees for the safe harbor plan exception to apply?
20 percent
## Footnote
If more than 20% of the nonhighly compensated workforce consists of leased employees, the safe harbor exception does not apply.
129
What happens if employers exceed the 20% limit of leased employees in relation to their retirement plans?
The practice of excluding leased employees from retirement plans becomes ineffective
## Footnote
Employers must either exclude the leased employees under coverage rules or cover them in their plans.
130
What must Corporation X do if leased employees account for at least 20% of the NHCE workforce?
Treat the leased employees as its employees for qualified plan purposes
## Footnote
This applies even if they are covered under a separate money purchase pension plan.
131
Fill in the blank: Corporation X may take credit for the entire contribution made to Corporation L's money purchase pension plan on behalf of the leased employees, assuming they perform all their services for _______.
Corporation X
## Footnote
This credit helps in meeting contribution requirements.
132
True or False: In Example 1-4, Corporation X can ignore the contributions made to leased employees when assessing its own plan's compliance.
False
## Footnote
Corporation X must consider the contributions to leased employees when determining compliance.
133
What type of plan does Corporation L maintain for its employees, including leased employees?
Money purchase pension plan
## Footnote
This plan satisfies the definition of a safe harbor plan.
134
Can a leased employee participate in a 401(k) plan maintained by the recipient employer?
Yes, a leased employee may participate even without direct compensation from the recipient employer.
## Footnote
The IRS has not issued guidance on this matter, so reasonable approaches are acceptable.
135
What has been the approach of some leasing organizations regarding 401(k) plans for leased employees?
Some leasing organizations set up their own 401(k) plans for leased employees, allowing them to participate.
## Footnote
The recipient employer may establish a separate plan for its common law employees.
136
How can a recipient employer take credit for contributions made by leased employees?
The recipient can take credit for contributions made by leased employees in the leasing organization's 401(k) plan when applying coverage and nondiscrimination testing to its separate plan.
## Footnote
This involves aggregating the recipient's plan with the portion of the leasing organization’s plan covering leased employees.
137
What is the purpose of aggregating the recipient's 401(k) plan with the leasing organization's plan?
To apply ADP and actual contribution percentage (ACP) testing under IRC §§401(k) and 401(m).
## Footnote
This helps ensure compliance with nondiscrimination requirements.
138
What flexibility do leasing organizations offer regarding matching contributions for leased employees?
Leasing organizations may allow recipients to negotiate different matching rates for their leased employees.
## Footnote
The recipient's plan then provides a mirror match for its common law employees.
139
In some cases, how do matching contributions work for leased employees?
Only common law employees make elective contributions under the recipient's plan, but both common law and leased employees receive matching contributions.
## Footnote
Matching contributions for leased employees are based on their elective contributions to the leasing organization's plan.
140
What is a multiple employer plan in the context of leasing organizations?
It is a plan where recipient employers and the leasing organization participate in a single plan for administrative convenience.
## Footnote
This can involve co-sponsoring separate plans or a single plan for all clients.
141
What caution should be taken regarding employee relations with professional employer organizations (PEOs)?
Some PEOs may not be the common law employer of the individuals providing services; the client organization may be the actual employer.
## Footnote
This can impact the qualification of the plans maintained by the PEO.
142
Fill in the blank: The IRS has not issued guidance on _______ participation in a 401(k) plan.
leased employees
143
What is the consequence of a PEO's plan violating the exclusive benefit rule?
The plan is not qualified.
## Footnote
This occurs when a plan covers individuals who are common law employees but not sponsored through a multiple employer plan arrangement.
144
What happens when an employee of the recipient becomes a leased employee?
The employee's prior service as common law employees must be counted by the recipient.
## Footnote
This situation arises when an employer contracts with a leasing organization.
145
If a common lawn law employee of the recipient is fired and hired as a leased employee by the contracted LO, will the EE continue to participate in the recipient's plan?
It depends on whether the plan excludes leased employees.
## Footnote
If excluded, participation will be discontinued; if not, participation continues uninterrupted.
146
What must a plan satisfy to exclude leased employees from coverage?
The plan must satisfy the coverage requirements under IRC §410(b) without covering leased employees.
## Footnote
Contributions or benefits from the leasing organization may count towards coverage requirements.
147
What determines whether an individual will receive an allocation of contributions after becoming a leased employee?
It depends on the terms of the plan.
## Footnote
The plan's specific provisions will dictate the allocation of contributions.
148
What is a requirement for participation in defined contribution plans on the last day of the plan year?
Employment on the last day of the plan year
## Footnote
This applies even to leased employees.
149
How is the top-heavy minimum calculated for a leased employee who is not a key employee?
Based on the entire year's compensation
## Footnote
This applies only if the plan is top heavy.
150
Does becoming a leased employee affect an individual's vesting rights in the recipient's plan?
No, vesting service continues to be credited
## Footnote
Service as a leased employee counts for vesting purposes.
151
What does IRC §414(n)(3) require regarding leased employees?
To treat the leased employee as an employee for IRC §415 purposes
## Footnote
This impacts contribution limits.
152
When a leased employee participates in both the recipient's and leasing organization's plans, what must be done?
Aggregate contributions and forfeiture allocations
## Footnote
This is to determine compliance with IRC §415 limits.
153
What happens when a common law employee becomes a leased employee?
There is no severance from employment
## Footnote
The individual remains ineligible for distribution due to termination.
154
How is a leased employee treated if later hired as a common law employee by the recipient?
Treated like any other employee for qualified plan rules
## Footnote
This includes eligibility and vesting purposes.
155
If a leased employee did not meet the requirements to be classified as such, how is their service counted?
Not counted towards the recipient's plan unless specified
## Footnote
This applies to service with the leasing organization.
156
How does the change to common law employee status affect plan participation?
It depends on how the recipient's plan deals with leased employees for eligibility purposes.
157
What happens if leased employees are excluded by classification?
The individual's hiring as a common law employee will be treated like any other change in employment classification.
158
What occurs if the classification as a leased employee was the only reason for ineligibility?
The individual will become a participant immediately upon being hired as a common law employee, provided all other eligibility requirements are satisfied.
159
What must be satisfied if the employee still has conditions to meet after becoming a common law employee?
The employee must satisfy other eligibility conditions, such as the year of service requirement.
160
If the plan does not exclude leased employees by classification, what happens to the employee's participation?
The employee's participation in the plan would continue uninterrupted after becoming a common law employee.
161
How does prior service as a leased employee affect vesting rights?
The common law employee's prior service as a leased employee would be taken into account for determining vesting rights.
162
What is the implication of IRC §415 limits for common law employees who become leased employees?
An individual's annual additions in both the recipient's and leasing organization's defined contribution plans are aggregated to determine if the recipient's plan violates IRC §415 limits.
163
What must the recipient plan consider if a leased employee becomes a common law employee in the middle of a plan year?
The recipient plan must take into account the annual additions credited in the leasing organization's plan for the part of the limitation year when the individual was a leased employee.
164
Fill in the blank: The employee's participation in the plan would continue ______ after becoming a common law employee.
uninterrupted
165
True or False: An employee's prior service as a leased employee is ignored for vesting rights.
False
166
Is there a severance from employment when a leased employee becomes a common law employee for the recipient?
No severance from employment occurs from the leasing organization.
167
What does IRC §414(n) focus on regarding leased employees?
IRC §414(n) focuses on the recipient with respect to the application of the qualified plan rules.
168
Is common ownership required between the leasing organization and the recipient for leased employees to be treated as employees of the recipient?
No, there does not have to be any common ownership.
169
What must be determined if there is common ownership between the leasing organization and the recipient?
It should be determined whether they are part of an affiliated service group or a controlled group of businesses.
170
What happens if the leasing organization and recipient are part of an affiliated service group?
Employees of both companies are treated as employed by a single employer for qualified plan purposes.
171
What is the treatment of leased employees who perform services for the recipient?
They are treated as employees of the recipient.
172
What is the IRS's stance on determining employer-employee relationships as part of a qualified plan determination?
The IRS does not make determinations regarding the existence of an employer-employee relationship.
173
What procedure does the IRS follow regarding employer-employee relationship determinations since 2015?
The IRS relies on the applicant's representations or assumptions regarding the existence of such a relationship.
174
What form can taxpayers file to determine worker status for federal purposes?
Form SS-8.
175
What does Rev. Proc. 2015-6, Section 5.08 allow applicants to elect?
A determination on whether:
* the employer is a member of an affiliated service group under §414(m)
* leased employees are deemed employees under §414(n)
* a partial termination has occurred with respect to the plan
176
What form is used to apply for a determination on leased employee status?
IRS Form 5300
177
Starting in 2017, when is a request for a determination letter on leased employee status permitted?
Only if the plan is otherwise eligible to file for a determination letter
178
When are plans are permitted to file for a determination letter according to Rev. Proc. 2016-37?
Only for initial qualification and upon plan termination
179
True or False: A leased employee is considered a common law employee of the leasing organization.
True
180
How are contributions provided to a leased employee by a Recipient who has a 401k plan treated, in relation to the leasing organization's plan?
They are not treated as provided by the leasing organization for qualification requirements
181
Fill in the blank: The crediting rule described in IRC §414(n)(1)(B) allows the recipient to consider contributions as if they were provided in the _______.
[recipient plan]
182
What is not required to be credited by the leasing organization's plan?
Service performed with the recipient before the leasing organization hired the leased employee
183
What must the leasing organization perform for compliance testing?
Appropriate compliance testing for its plan as a whole.
184
What compliance tests are mentioned for coverage testing?
* Coverage tests under IRC §410(b)
* Nondiscrimination tests under IRC §§401(a)(4), 401(k), and 401(m)
* Top-heavy tests under IRC §416
185
How does the leasing organization apply compliance tests?
Like any other employer, considering employees who perform services for the leasing organization and those providing services to recipient employers.
186
How are leased employees counted in compliance testing?
They are counted twice: once at the leasing organization's level and again at the recipient's level.
187
Fill in the blank: To determine if the Corporation L plan satisfies the coverage requirements, it must account for all employees who are not _______ employees.
excludable
188
True or False: The leasing organization does not need to consider its leased employees for compliance testing.
False
189
Considering Participation in each plan type by a Lease EE (LE)
How are Years of Service for Eligibilty and Vesting Determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: All service as Leased EE (LE) counts
SEP LO: Consisers LO Common Law EEs, but not Rs Common Law EEs
MEP (R&LO): all are aggregated- special rules for Break in Service apply
190
Considering Participation in each plan type by a Lease EE (LE)
How is Non-Discrimination Testing determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: Benefits/Contributions from LO & R plans included
SEP LO: Benefits/Calculations from LO plan included, R plan excluded
MEP (R&LO): Tested separately for each R vs LO, but LO provided are considered in both R and LO tests
191
Considering Participation in each plan type by a Lease EE (LE)
LE eligible?
SEP R & LO Plans
MEP (R&LO)
SEP R: Yes, when Eligibility Reqs satisfied unless excluded (and passes coverage/non discrimination)
SEP LO: Yes, when Eligibility Reqs satisfied
MEP (R&LO): Yes, when eligibility Reqs satsified
192
Considering Participation in each plan type by a Lease EE (LE)
How is Coverage Testing determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: LEs included
SEP LO: LEs included
MEP (R&LO): Tested Seperately for R and LO, but LE considered in both
193
Considering Participation in each plan type by a Lease EE (LE)
How is Compensation Limit determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: Only Comp from R
SEP LO: Comp from all Rs
MEP (R&LO): Comp from all Rs and LOs who adopted
194
Considering Participation in each plan type by a Lease EE (LE)
How is 415 Limit determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: Included- aggregate contributions of LO w/ R for testing
SEP LO: Include only contributions from LO plan, not R plans
MEP (R&LO): $ from LO and all Rs who adopted are aggregated
195
Considering Participation in each plan type by a Lease EE (LE)
How are Top Heavy Rules determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: LE included
SEP LO: LE included
MEP (R&LO): Tested Separately for each R vs LO, but LE considered for both
196
Considering Participation in each plan type by a Lease EE (LE)
How is HCE Determination made in:
SEP R & LO Plans
MEP (R&LO)
SEP R: LE included
SEP LO: LE included
MEP (R&LO): LE included
197
Considering Participation in each plan type by a Lease EE (LE)
How is ESOP participation determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: excluded
SEP LO: LE included
MEP (R&LO): LE included
198
Considering Participation in each plan type by a Lease EE (LE)
Does participation by LE violates exclusive Benefit Rule?
SEP R & LO Plans
MEP (R&LO)
SEP R: No
SEP LO: No- provided LE is truly Common Law EEs of LO
MEP (R&LO): No- treated as if LO and R are a single ER
199
Considering Participation in each plan type by a Lease EE (LE)
Are Contributions Deductible in:
SEP R & LO Plans
MEP (R&LO)
SEP R: Contributions made by R are deductible by R
SEP LO: Contributions made by LO are deductible by LO
MEP (R&LO): Deducted separately by each R and LO
200
Considering Participation in each plan type by a Lease EE (LE)
Can contributions made by the other org be considered in compliance testing in:
SEP R & LO Plans
MEP (R&LO)
SEP R: Yes, LO contributions can be considered for Coverage and Non-Discrimination in Rs Plan
SEP LO: No R contributions are not considered for Coverage and Non-Discrimination in LOs Plan
MEP (R&LO): Yes
201
Considering Participation in each plan type by a Lease EE (LE)
How is Safe Harbor Exception determined in:
SEP R & LO Plans
MEP (R&LO)
SEP R: LE not treated as EEs for R plan if R eligible to use SH exception
SEP LO: LE treated as EE for LO plan if R eligible to use SH exception
MEP (R&LO): LE treated as EEs for LO Plan for Compliance if R eligible to use SH exception & MEP meets SH reqs
202
Considering Participation in each plan type by a Lease EE (LE)
How is Elective Deferrals paid in:
SEP R & LO Plans
MEP (R&LO)
SEP R: Made to LO plan (where paid), but R takes credit for them and match, coverage and non-disc testing
SEP LO: made to plan
MEP (R&LO): made to plan
203
Considering Participation in each plan type by a Lease EE (LE)
How is Match paid in:
SEP R & LO Plans
MEP (R&LO)
SEP R: Made by R based on elective contributions contributed to LOs Plan
SEP LO: Coordinated by LO and R
MEP (R&LO): Coordinated by LO and R
204
Considering Participation in each plan type by a Lease EE (LE)
How is Common Ownership between Orgs for LO to be treated as EE:
SEP R & LO Plans
MEP (R&LO)
SEP R: none needed
SEP LO: none needed
MEP (R&LO): none needed
205
Considering Participation in each plan type by a Lease EE (LE)
How is the 5500 filed?
SEP R & LO Plans
MEP (R&LO)
SEP R: seperately
SEP LO: separately
MEP (R&LO): only one
