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Home > Resources > Health & Welfare > Employee Aggregation Rules: Leased Employees

Employee Aggregation Rules: Leased Employees

June 29, 2015 by Ken Ruthenberg

Fourth And Final (Whew!!) Of A Series

In our first three action-packed episodes on the aggregation of employers and employees, we spent a dark and stormy night with the owners of SMALLCO and SMALL Vineyards and their advisors learning about the steamy world of controlled group rules. We introduced Dr. D to the seamy underside of affiliated service groups (and probably ruined his otherwise sunny day). We now turn to our final aggregation rule: the leased employee rule, which treats each employee who qualifies as a “leased employee” as if he were employed by someone other than his true employer.

Let’s pick on Dr. D some more. It turns out that Dr. D does not consider all of his small staff to be his employees because many are employed by the Safe Harbor Employee Leased Labor Company (or Shellco), not his professional corporation. So Dr. D doesn’t cover all of his staff in his retirement plan nor in his medical expense reimbursement plan. Why might Dr. D have a problem?

Well, for Dr. D, the good news is that his dental practice and Shellco (in which he has no ownership interest) do not have to be aggregated under either the controlled group rules or the affiliated service group rules. The bad news is that the Shellco employees whom he uses in his practice may be treated as his leased employees and, as a result, taken into account when testing his employee benefit plans. (At this point, Dr. D wishes he had never gotten out of bed this morning.)

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Filed Under: Health & Welfare Tagged With: Blog

About Ken Ruthenberg

Ken's executive compensation clients appreciate learning the latitude they may have with plans that meet their organizational goals by conditioning rewards to key employees. He helps them implement their creativity while staying within the rules. They also count on his unsurpassed knowledge of the law governing qualified and non-qualified plans, and health and welfare benefits for efficient and effective solutions.
Learn More About Ken

EDITOR’S NOTE: We did the best we could to make sure the information and advice in this article were current as of the date of posting to the web site. Because the laws and the government’s rules are changing all the time, you should check with us if you are unsure whether this material is still current. Of course, none of our articles are meant to serve as specific legal advice to you. If you would like that, please call us at (916) 357-5660.

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