Who is Considered a Leased Employee?

Dec 8, 2014 | 401(k) Plans, Latest News

Does your Company employ leased employees? An employee is considered “leased” if all of the following criteria is met:

  • The services must be performed under an agreement between the recipient and a leasing organization.
  • The services must be performed for at least one year on a substantially full-time basis. Substantially full-time service means 1,500 hours in a 12-month period (or 75% of the customary hours in that job position, if less).
  • The recipient employer must have primary direction or control over the services rendered by the individual.

All service is counted during the period the individual is a leased employee.

If your plan document does not exclude leased employees, once an individual satisfies the leased employee definition he/she is treated as an employee as of the close of the 1-year qualifying period. In a 401(k) plan, eligible leased employees must be given the right to make deferrals and they also must be included in all non-discrimination testing. Please keep this in mind when submitting your census information to your Third Party Administrator.

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