Who's the Employer

A Guide to Employee and Aggregation Issues Affecting Qualified Plans

BenefitsLink Q&A Column

Since 1999, Derrin Watson has authored a column for David Baker's outstanding BenefitsLink web site. The column is designed to supplement Derrin's book, Who's the Employer. It deals with the same issues as his book, and has become an important part of the dialog between Derrin and his readers.

Along the way, the column has become the largest column at BenefitsLink. With close to 200 Q&A's organized chronologically as they were written, it can be difficult to find things.

So, here we organize his questions by topic. This should make it easy for you to find what you're looking for. Of course, these are only general discussions on the issues involved, and not substitutes for formal legal advice. Click a topic below to see the list of associated Q&A's:

	Entity Status and Self-Employed Individuals
	Employee Status and Independent Contractors
	Leased Employees and PEOs (before Rev Proc 2002-21)
	Rev Proc 2002-21 and PEOs
	Shared Employees
	Controlled Groups
	Controlled Group Attribution
	Controlled Group Exclusion
	Businesses Under Common Control
	Traditional Affiliated Service Groups
	ASG Attribution
	HCE Status
	Management Function Groups
	Related Party Rules
	Other Issues

Entity Status and Self-Employed Individuals
225	W-2, 1099, or Both?
208	Expense Sharing Arrangements As ASGs
206	Proprietorship as Partner in an Emergency Medical Partnership
181	Self-employed Clergy
155	Effect of IRS Notice 99-6 on Single-Member LLCs Not Taxed As Corporations
154	Single Member LLCs/Limited Partners as Employees
150	Royalties as Earned Income
148	Treatment of LLCs Under the ASG Rules
139	What's an Entity?
107	Partner as Affiliated Service Group Entity
74	LLC Member's Compensation for 401(k) Purposes
65	LLC Member as Employer

Employee Status and Independent Contractors
244	Derrin Watson -- Employee or Independent Contractor
243	Foreign Independent Contractor or Employee
239	Incorporated Officer
205	Illegal Aliens and the Supreme Court
197	Independent Contractors on Health Plan
194	Excluding Amish Workers
192	Excluding Workers by Classification
190	Employee to Independent Contractor
189	Commissioned Insurance Sales
155	Effect of IRS Notice 99-6 on Single-Member LLCs Not Taxed As Corporations
154	Single Member LLCs/Limited Partners as Employees
122	Use Of LLCs To Change Employee Status
104	Substantial Presence Test for Residency Status
103	Exclusion of Nonresident Aliens
100	Illegal Aliens As Employees
89	Does an Independent Contractor Agreement Matter?
84	Plan For Independent Contractor Truckers
61	Attendant as Independent Contractor
52	Who's the Employer of an LLC Member?
46	Employee Becomes an Independent Contractor
24	Employee on someone else's payroll
13	Audit Guidelines and Independent Contractors
10	Different Employee Definitions for Different Agencies

Leased Employees and PEOs (before Rev Proc 2002-21)
209	Client Termination In PEO Plan
153	Watson's Take on PEO Controversy
142	Leasing Doctors
137	State Law and Professional Employer Organizations
136	Breaks in Service for 414(n)(4)(B) Service
135	Lease to Own and Code Section 414(n)(4)(B)
124	Stock Options and Leased Employees
117	Who Takes the Work Tax Credits If We Use a Staffing Firm?
105	Leased Employees and Self-Employed Medical Reimbursement Plans
99	Avoiding the Substantially Full-Time Rule for Leased Employees
96	Ignoring the Leasing Company
86	Handling "Leased" Employees on 5500 Forms
82	Top Heavy Rules for Plan Covering Leased Executives
68	Owner as Leased Employee
64	401(k) Plans Using Professional Employer Organizations-- Miscellaneous Questions
63	Co-sponsorship of plans
59	Current Status of "Dual Employer" Arrangements for PEOs
48	Employees Working for Franchisor
43	PEO Sponsoring a Cafeteria Plan
42	Combination of leasing company plan and recipient's plan
37	Is a Professional Employer Organization a "co-employer" with its customer companies?
34	LLC and Employee Leasing Firm - How to Cover the LLC members?
20	Hours of Service for Leased Employees
11	Counting Hours in Lease to Own
5	Existing plan with new staffing firm
4	Staffing Firms as Common Law Employers
2	Recipient Offsetting Staffing Firm Contributions

Rev Proc 2002-21 and PEOs
246	PEOs and Controlled Groups
232	Management Company Might Be PEO
220	Rev. Proc. 2002-21-- Where Are We Now?
211	No Back Office Employees in PEO Multiple Employer Plan
204	"Safe Harbor" Leased Employee Plans After Rev. Proc. 2002-21
200	Watson's Fixes for Rev. Proc. 2002-21
199	Temp Firms as PEOs
198	Hospital as PEO
196	Testing a PEO Multiple Employer Plan
195	PEOs and Retirement Deductions
193	Handling Assets of a Client Organization's Terminating 401(k) Plan
191	Rev. Proc. 2002-21 and Leased Employees
188	Rev. Proc. 2002-21 and Employee Status
186	Client Organizations and Recipients
185	Temporary Employees Loses Under Rev. Proc. 2002-21
182	Adopting a Single Employer PEO Plan After May 13
179	Is a CO Required to Cosponsor a PEO Multiple Employer Plan Under Rev. Proc. 2002-21?
178	PEOs and Welfare Plans After Rev. Proc. 2002-21
177	Rev. Proc. 2002-21 Deadlines
176	Entering or Leaving a Multiple Employer Plan
175	PEO Client Maintaining Its Own Plan; Why the PEO Likely Isn't the Employer
174	Bootstrapping Employer Status
173	Rev. Proc. 2002-21 Relief For Multiple Employer Plans
172	PEO Plans and Determination Letters
171	Rev. Proc. 2002-21 and the Separate CO Plan
170	PEO Spinoff Plan under Rev. Proc. 2002-21
169	Employee Status in PEO Multiple Employer Plan
168	Multiple Employer PEO Issues
166	Additional Guidance on Rev. Proc. 2002-21
165	Rev. Proc. 2002-21 Transition Rule Revisited; Other Compliance Problems
162	Rev Proc 2002-21; Relief for the Compliant

Shared Employees
149	Husband and Wife, Each Practicing Medicine as Sole Proprietors
70	De Minimis Shared Employee
57	Re the Earlier Shared Employees Q&A -- What About the Proposed Regulations?
56	Shared Employees

Controlled Groups
246	PEOs and Controlled Groups
245	Most Frequently Asked Controlled Group Question
241	Controlled Groups and Loan Defaults
240	Controlled Groups and Loans
227	Controlled Groups Without Employees
224	Bury Your Controlled Group Problems in Vogel Fertilizer
218	Multiple Employer Plan Involving Controlled Group
215	Change in Status and Top Heavy Minimums
212	EGTRRA and Controlled Groups
180	Over Half Isn't At Least 80%
161	Counting Shareholder
160	Voting Power Creating Controlled Group
141	Consequences of Separate Status for Partnerships; Owner-Employee Rule
132	Foreign Parents of Multilevel Group
125	Filing for Midyear Changes in Controlled Group Status
123	Controlled Groups, Common Control and SEP
121	Dentists as Investors
118	Effect of S Corp Status on Controlled Group Determination
116	Company Splitup
115	Avoiding Controlled Groups By Staying Unincorporated?
106	Testing an Ending Controlled Group
85	Nonprofits and Controlled Groups
81	Overlapping Groups and Options in Family Situations
79	Excluding Employees of Controlled Group Members
73	Does a plan automatically cover employees of an affiliated employer?
66	50% Isn't More Than 50%
53	Controlled group determination for ESOP that covers owner of plan sponsor
51	Transfer of Employment from Fifty Percent Subsidiary to Parent Corporation
45	Wholly-owned subsidiaries of controlled groups
38	Should we treat these two as a controlled group just to be safe?
35	Controlled groups and SIMPLE IRAs
32	I have a foreign parent with subsidiaries in the U.S. and foreign subsidiaries - how many do I include?
31	Overlapping groups
30	Corp and LLCs as Controlled Group
29	What does it mean to be part of a controlled group
28	Parent-Subsidiary Groups
25	Foreign parent of controlled group
22	Qualified plan as shareholder for controlled group
17	Transfer within a controlled group
16	Management function group and controlled group
14	Multiple 75% corporations
12	Separation from Service for Pension Plan in CG Situation
9	Controlled Groups in Marriages Continued
8	Separation from Service in Controlled Group

Controlled Group Attribution
242	Multiple Family Attribution
236	Attribution Adds Owners, Not Shares
223	Attribution From Entities Under Different Rules
207	No Sibling Attribution In Controlled Groups
167	Attribution Through Grantor Trust
159	ESOP as Majority Owner
156	Attribution Through Children's Trust
151	Convertible Stock Constituting An Option
149	Husband and Wife, Each Practicing Medicine as Sole Proprietors
131	Marital Attribution Strikes Again!
114	Attribution Arising From a Lien?
113	Community Ownership of Attributed Stock?
101	Parental Attribution
93	Is Attributed Stock Counted Once, or Twice?
92	Triple Attribution In Controlled Group
81	Overlapping Groups and Options in Family Situations
71	Community Property Constituting Direct Ownership
67	Parent-Child Attribution
55	Are rights of first refusal considered "options"?
44	Attribution at age 18 or 21?
41	Repeal of Family Aggregation Does Not Eliminate Controlled Group
39	More on options
26	Using options to create controlled groups
23	Family Attribution
22	Qualified plan as shareholder for controlled group
18	Can Options Break Up Controlled Groups?
15	Parent child attribution rules
9	Controlled Groups in Marriages Continued
7	Attribution from Options Granted by Corporation
3	Parent Child Attribution and family aggregation

Controlled Group Exclusion
222	Employee for Exclusion Rules
159	ESOP as Majority Owner
158	Exclusion of ESOP Stock
143	Excluding ESOP Stock
55	Are rights of first refusal considered "options"?

Businesses Under Common Control
235	What's a Trade or Business Under IRC 414(c)?
230	Common Control in Partnerships
214	Domestic and Business Not Aggregated
202	Are Sole Proprietorship and 60%-Owned Corporation Subject to 415(h)?
201	Common Control Depends on Controlled Group Type
187	Common Control and 401(a)(26)
129	No Mandatory Coverage for Housekeeper
123	Controlled Groups, Common Control and SEPs
115	Avoiding Controlled Groups By Staying Unincorporated?
85	Nonprofits and Controlled Groups
78	415 Limits with Similar Businesses
62	Common Control Sponsor Withdrawal
50	SIMPLE IRAs and Related Employers
40	Management Function Group and Common Control Group
30	Corp and LLCs as Controlled Group
19	Tax exempt organizations and common control
6	Common Control with Sole Proprietorship and Corporation

Traditional Affiliated Service Groups
238	Professional Service Corporation Exemption to the Rescue
233	WSJ Forgets ASG Rules
231	Regularly Providing Services as an A-Organization
221	Inadequate Facts Lead To Inadequate Answers
219	Employee for B-Org HCE Purposes
213	ASG with Separate Plans
208	Expense Sharing Arrangements As ASGs
206	Proprietorship as Partner in an Emergency Medical Partnership
203	Laser Surgery Center in ASG
164	Insurance ASG Issues; Referral of Clients Means "Regularly Associated"?
157	HCEs and ASGs
152	B-Orgs and Significant Services
149	Husband and Wife, Each Practicing Medicine as Sole Proprietors
148	Treatment of LLCs Under the ASG Rules
145	ASG Arising from Shared Administrative Functions?
140	Professional Partnerships
130	Mortgage Company as Service Organization
127	Merged Business Can Be Separate From Earlier Businesses
126	Proprietorship and Corporation not an ASG
121	Dentists as Investors
120	SIMPLEs and ASGs
107	Partner as Affiliated Service Group Entity
87	Multiple A-Orgs in an Affiliated Service Group
80	Billing Corporation as B-Org?
77	Equipment Leases and Affiliated Service Groups
76	Having Just a Single Customer Doesn't Mean Aggregation is Required
72	Look Both Ways When Crossing Railroad Tracks or When Analyzing Affiliated Service Groups
47	Sole Proprietorship and Affiliated Service Group
36	Deduction limits for ASG
33	Effect of ASG on SARSEP
27	Classic ASG with multiple plans

ASG Attribution
226	Collapsing an ASG
223	Attribution From Entities Under Different Rules
217	HCE Attribution from Trusts
167	Attribution Through Grantor Trust
156	Attribution Through Children's Trust
147	What's the Difference Between Sections 267 and 318?
146	Is 267 or 318 Attribution Used for Affiliated Service Groups?
144	ASG Attribution to Entities
134	Attribution to Entities (continued)
133	Layers of Attribution to Entities
113	Community Ownership of Attributed Stock?
110	Attribution to Entities
109	Contingent Beneficiary As Shareholder-Employee
98	Grandchildren as Highly Compensated Employees
95	In-laws as HCEs
83	Stepchildren Under Attribution Rules
69	HCE Attribution Rules Between Parent and Child
60	Attribution for Highly Compensated Employees
54	Attribution to Mother-in-Laws
15	Parent child attribution rules

HCE Status
217	HCE Attribution from Trusts
157	HCEs and ASGs
138	Community Ownership Affects HCE Status
98	Grandchildren as Highly Compensated Employees
95	In-laws as HCEs
83	Stepchildren Under Attribution Rules
60	Attribution for Highly Compensated Employees
54	Attribution to Mother-in-Laws

Management Function Groups
232	Management Company Might Be PEO
216	What Is a Management Function?
145	ASG Arising from Shared Administrative Functions?
119	Trustees as Managers
112	Family Management Company
108	Doctor as Management Firm
102	Construction Management Function Group
97	Directors As Managers
88	414(m) Proposed Regs Withdrawn?
40	Management Function Group and Common Control Group
21	Principal business of a management organization
16	Management function group and controlled group

Related Party Rules
156	Attribution Through Children's Trust
147	What's the Difference Between Sections 267 and 318?
112	Family Management Company
94	Are Brothers and Sisters Related Parties?

Other Issues
237	Differing Provisions In Multiple Employer Plan
229	Overlapping Groups and Filing Requirements
218	Multiple Employer Plan Involving Controlled Group
196	Testing a PEO Multiple Employer Plan
184	Multiple Employer Plan or Multiple Plans?
183	Definition of Compensation in a Multiple Employer Plan
141	Consequences of Separate Status for Partnerships; Owner-Employee Rules
116	Company Splitup (414(a))
90	Multiple Restaurants; One Plan?
78	415 Limits with Similar Businesses
75	How to Handle Ex-Employees After Spinoff to Form an Unrelated Company
73	Does a plan automatically cover employees of an affiliated employer?
49	Statutory Employees

Last Revised 01/16/03