I have two groups of employees who work for XYZ Corp and for whom I am trying to decide if either group should be included in my non-excludable count for 410(b) coverage for Corporation XYZ:

Group 1: 4 Employees who are paid by ABC Leasing Company and worked for XYZ Corporation 20 hours a week for at least one year. Daily duties are determined and directed by XYZ Corporation.

Group 2: 16 employeeswho are paid by ABC Leasing Company and worked for XYZ Corporation 30-40 hours a week for more than a year. Daily duties are determined and directed by XYZ Corporation.

Group 2 full under the definition of 'leased employees' And so I believe Group 2 is included in my count, but I am not sure about Group 1. Can anyone provide guidance.

Assuming you want guidance as to whether 20 hrs/wk is "substantially full-time", then here is a quote from the IRS's Explanation to the Employee Leasing Worksheet (Worksheet No. 8, found at http://www.irs.gov/pub/irs-pdf/p7003.pdf) that may be helpful:

"A person is considered to have performed services on a substantially full-time basis for a period of at least one year if: (i) during any 12-consecutive-month period such person has performed at least 1500 hours of service for the recipient, or (ii) during any 12-consecutive-month period such person performs services for the recipient for a number of hours at least equal to 75 percent of the average number of hours that are customarily performed by an employee of that recipient in the particular position. The one-year period includes service of the employee prior to the effective date of section 414(n). In addition, any period of service performed by the employee as a common law employee of the recipient is taken into account for purposes of determining whether the employee has performed services on a substantially full-time basis for a period of at least one year."

The material cites to Q&As 7, 8 & 12 of Rev. Notice 84-11.

I suggest a good read of the Worksheet and related material.

Being paid by the "Leasing Company" does not, by itself, make them "leased employees". XYZ seems to be the common law employer and the "Leasing Company" could just be the payroll agent.

It could be that you should determine "Who's the Employer?" first.

ABC Leasing Company is the 'common law employer' of any individuals that it pays. Does this change things?