Single Person 401k
I have a couple questions in regards to someone that is thinking of opening a Single Person 401k.
A business owner with an S-Corp would like to open a Single Person 401k or SIMPLE IRA plan. He is the only W-2 employee, but he does have “leased” employees. The “employees” are employed by another company, get their benefits, W-2, etc. from this other company. The owner does nothing more than write a check made out to the other company for the employees. He has no employees in the traditional sense.
1. With Leased employees would he still qualify for the Single person 401k/SIMPLE IRA?
2. He has some government contracts. Would the Davis-Bacon Rule affect any of this?
Permalink Submitted by BruceM on Tue, 2009-03-17 23:16
Assuming these are leased employees as defined in §414(n)(2) (i.e. are doing the same work as common law EE’s), generally, leased EE’s must be considered to be part of the ER’s control group for retirement plan eligibility, except when both of the following conditions have been met:
1. Leased EEs represent
Permalink Submitted by Martin Helmer on Wed, 2009-03-18 02:42
SIMPLE Ira is subject to leased employee rules, just like the 401(k).
Not immediately sure how to satisfy Davis Bacon. You have to give employees a package that includes prevailing wage plus package for prevailing wage fringe. Fringe can include a retirement plan but doesn’t have to to satisfy Davis Bacon. Fringe can be additional wages, but then you get the employment tax hit. I don’t know how the leased employee aspect fits in. For all we know, your leased employees might not have to receive the Davis Bacon package. Be sure to check out state law.
Permalink Submitted by [email protected] on Wed, 2009-03-18 22:34
Went to several resources for info on Davis-Bacon, etc. Fom everything I can gather, the person could do a Single Person 401k if the leased employees are able to contribute to a retirment plan with the company they are technically employed by. As far as Davis-bacon, that will take some research before an answer will come through.
Thanks for the information!