Simple IRA

Submitted by Don Warnke on Fri, 2013-11-15 19:38

If an S-corp sets up a SIMPLE plan does the business only match contributions based on W-2 income? the business owners recieve W-2 income and also dividends, also they have some employees that are W-2 employees and they have some folks the do work for them on a 1099 basis. as i understand only the W-2 employees would be eligible to participate and recieve a match?
thanks
Don



Submitted by Alan - IRA critic on Fri, 2013-11-15 21:42

Correct, non employees (1099 receivers) cannot participate. Contributions are only matched with W-2 income, not dividends.

Submitted by Don Warnke on Sat, 2013-11-16 03:54

somebody else posted that under irc subchapter 414(n) that 1099 labor may have to be given oportunity to participate, i am not a CPA so when i try to read some of that stuff it makes no sense to me. Could you clarify?

Submitted by Martin Helmer on Sat, 2013-11-16 02:01

See IRC subsection 414(n) for specifics that apply even to 1099 people.

Submitted by Don Warnke on Mon, 2013-11-18 15:48

somebody else posted that under irc subchapter 414(n) that 1099 labor may have to be given oportunity to participate, i am not a CPA so when i try to read some of that stuff it makes no sense to me. Could you clarify?

Submitted by Alan - IRA critic on Mon, 2013-11-18 18:00

  • He is correct, but 414n deals with “employee leasing” as defined. I copied the following definition of “leased employees” for the purposes of 414n below. Note that only those 1099 people that fall under the definition will have to be covered and that includes long term people performing full time services for over a year, and under primary direction or control of the employer. Note that there does not have be an actual leasing organization.
  • 414n 2) Leased employee For purposes of paragraph (1), the term “leased employee” means any person who is not an employee of the recipient and who provides services to the recipient if—(A) such services are provided pursuant to an agreement between the recipient and any other person (in this subsection referred to as the “leasing organization”), (B) such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least 1 year, and (C) such services are performed under primary direction or control by the recipient.

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