10. Definition of leased employee

Statement of Requirement: Code§§ IRC 414(n), 414(q)

Document Provision: _____

Sample Plan Language:

The term leased employee means any person (other than an employee of the recipient) who pursuant to an agreement between the recipient and any other person (“leasing organization”) has performed services for the recipient (or for the recipient and related persons determined in accordance with Code § IRC 414(n)(6)(A)) on a substantially full-time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer.

A leased employee shall not be considered an employee of the recipient if: (1) such employee is covered by a money purchase pension plan providing: (i) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined in Code § IRC 415(c)(3), but including amounts contributed pursuant to a salary reduction agreement which are excludable from the employee’s gross income under Code §§ IRC 125, 402(e)(3), 402(h) or 403(b), (ii) immediate participation, and (iii) full and immediate vesting; and (2) leased employees do not constitute more than 20 percent of the recipient’s nonhighly compensated workforce.

183 | Defined Benefit Plan LRM Package 08/2020 06/2026