Hello,

The question I have pertains to SIMPLE plans in California due to a state legislation change. In 2020 California passed legislation referred to AB5 the now requires companies that were using independent contractors for labor to classify those independent contractors as employees of the business.

In your opinion, when taking into SIMPLE eligibility rules where a plan would require employees to work for the company in two prior years and earn $5,000, would the compensation and service time someone earned and completed as an independent contractor count for eligibility purposes once they are considered an employee? Or would the eligibility determination period disregard work done as a contractor and start once they become an employee?

I guess aside from this specific state rule, you see people working as contractors get hired on as full time W2 employees all the time. How would eligibility service and compensation be counted in those scenarios?

Thanks!