Rev Proc 2002-21 Definitions
The Rev Proc defines several important terms which are critical to understanding it. Amazingly, it leaves undefined its most important term, PEO. It is obvious from the Rev Proc that all staffing firms are considered as PEO's, no matter how the style themselves. However, the Rev Proc leaves open the question of whether
hospitals, for example, could be considered a PEO subject to the Rev Proc if they provide workers for nearby clinics. Here are the key terms the Rev Proc does define:
||Client Organization (CO). This is the firm that uses the PEO to provide staffing services for some or all of their workers. It doesn't matter how many or how few workers the PEO provides to the CO. In the language of IRC 414(n), the CO is a recipient and the PEO a leasing organization.
||Worksite Employees. These are the workers the PEO provides to the CO. If the CO/recipient were not the common law employer of these workers, and the workers met the other requirements of IRC 414(n), they would be leased employees.
True temporary employees, who are likely the common law employees of the
PEO, would be classified as Worksite Employees, as well as workers
permanently assigned to a particular CO. (¶6.04)|
||PEO Retirement Plan. This is a defined contribution plan (such as a 401(k) plan or profit sharing plan) intended to satisfy IRC 401 or 403(a), sponsored solely by a PEO and covering Worksite Employees. Multiple employer plans and defined benefit plans are not covered by the Rev Proc.
||Multiple Employer Retirement Plan. This is a defined contribution plan under IRC 401 or 403(a) and IRC 413(c)
cosponsored by the PEO and by all CO's with participating employees.
Click here for more information on the
operation of such plans. (¶6.02)|
||PEO Decision Date. This is 120 days after the first day of the PEO's plan year beginning after 12/31/02. For a calendar year plan, this is May 2, 2003. There are several things the PEO must do by this date.
||Compliance Date. The last day of the plan year beginning in 2003. Essentially everything has to be completed by this date for the PEO to have relief.
||Effective Date. May 13, 2002.
(¶9.) Plans adopted after this date
cannot use this Rev Proc. (¶4.01.)|
||Spinoff Retirement Plan. This is a plan set up to hold the
assets and liabilities for Worksite Employees whose CO chose, through action
or inaction, to have benefits distributed to participants. It is to be
terminated prior to the Compliance Date and assets distributed as soon as
Last Revised 11/02/02