Company A has leased employees who have worked more than 1 year and 1000 hours so they are now eligible to enter Company A's plan (effective 1/1/2001).

Leasing Company has an ESOP. The leased employees participate in this plan.

Company A has an integrated profit sharing plan. Company A is in budgeting mode for 2001 and is considering new plan design options.

Question:
If the leased employees are now eligible to participate in 2 plans, does Company A get any "offset" for contributions made by the Leasing Company's ESOP for the leased employees?

Someone recently asked me this question and I am completely unfamiliar with anything beyond the very basic rules of leased employees. Any help will be greatly appreciated!

I think you have a bigger problem than the offset. IF leased employees turn into common law employees section 414 wouldn't allow them to be deemed also common law employees of the leasing company and therefore they should not be eligible for the ESOP any longer. You can't use pay from A as a contribution bases in the ESOP if they are not part of a control group. Circumstances may allow co-adoption but that is a complicated issue. See PWBA opinion 92-04A for an analysis of the leasing arrangement and who the employer is going to be deemed.