Anything new on PEO's (EE Leasing Companies) and 401(k) Plans? Do they go the multi ER route , anthing ?

A Technical Advice Memorandum (TAM) issued by the IRS in 1996 could cause the revocation of the tax qualified status of leasing co. retirement plans that were established on the "single employer" basis; this would be true even if these plans only covered NHCEs. This info was passed onto me by the ERISA atty whose client was the subject of this TAM. As a result, our firm treats a plan of unrelated employers, such as leasing companies, as a multiple employer arrangement, with one plan doc and particpating employer agreements for each worksite joining the Plan. Of course, plan design, testing and 5500 filings are done according to the multiple employer plan rules. Plans operating as single employer-sponsored arrangements could potentially be in jeopardy of violating the exclusive benefit rule, even if they do not otherwise violate any non-discrimination rules. There are holes in the IRS argument,as well. However, we have decided to take a conservative approach and administer these Plans as multiple employer plans.


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