Fourth And Final (Whew!!) Of A Series
In our first three action-packed episodes on the aggregation of employers and employees, we spent a dark and stormy night with the owners of SMALLCO and SMALL Vineyards and their advisors learning about the steamy world of controlled group rules. We introduced Dr. D to the seamy underside of affiliated service groups (and probably ruined his otherwise sunny day). We now turn to our final aggregation rule: the leased employee rule, which treats each employee who qualifies as a "leased employee" as if he were employed by someone other than his true employer.
Let's pick on Dr. D some more. It turns out that Dr. D does not consider all of his small staff to be his employees because many are employed by the Safe Harbor Employee Leased Labor Company (or Shellco), not his professional corporation. So Dr. D doesn't cover all of his staff in his retirement plan nor in his medical expense reimbursement plan. Why might Dr. D have a problem?
Well, for Dr. D, the good news is that his dental practice and Shellco (in which he has no ownership interest) do not have to be aggregated under either the controlled group rules or the affiliated service group rules. The bad news is that the Shellco employees whom he uses in his practice may be treated as his leased employees and, as a result, taken into account when testing his employee benefit plans. (At this point, Dr. D wishes he had never gotten out of bed this morning.)
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