(1) In general
For purposes of the requirements listed in paragraph
(3), with respect to any person (hereinafter in this
subsection referred to as the "recipient") for whom a leased employee performs
(A) the leased employee shall be treated as an
employee of the recipient, but
(B) contributions or benefits provided by the
leasing organization which are attributable to services performed for the
recipient shall be treated as provided by the recipient.
(2) Leased employee
For purposes of paragraph (1), the
term "leased employee" means any person who is not an employee of the recipient
and who provides services to the recipient if--
(A) such services are provided pursuant to an
agreement between the recipient and any other person (in this subsection
referred to as the "leasing organization"),
(B) such person has performed such services for
the recipient (or for the recipient and related persons) on a substantially
full-time basis for a period of at least 1 year, and
(C) such services are performed under primary
direction or control by the recipient.
For purposes of this subsection, the requirements
listed in this paragraph are--
(A) paragraphs (3), (4), (7), (16), (17), and (26)
of section 401(a),
(B) sections 408(k), 408(p), 410, 411, 415, and
(C) sections 79, 106, 117(d), 120, 125, 127, 129,
132, 137, 274(j), 505, and 4980B.
(4) Time when first considered as
(A) In general
In the case of any leased employee, paragraph
(1) shall apply only for purposes of determining whether the
requirements listed in paragraph (3) are met for periods
after the close of the period referred to in paragraph (2)(B).
(B) Years of service
In the case of a person who is an employee of the
recipient (whether by reason of this subsection or otherwise), for purposes of
the requirements listed in paragraph (3), years of service
for the recipient shall be determined by taking into account any period for
which such employee would have been a leased employee but for the requirements
of paragraph (2)(B).
(5) Safe harbor
(A) In general
In the case of requirements described in
subparagraphs (A) and (B) of paragraph (3), this subsection
shall not apply to any leased employee with respect to services performed for
a recipient if--
(i) such employee is covered by a plan which is
maintained by the leasing organization and meets the requirements of
subparagraph (B), and
(ii) leased employees (determined without regard
to this paragraph) do not constitute more than 20 percent of the recipient's
nonhighly compensated work force.
(B) Plan requirements
A plan meets the requirements of this subparagraph
(i) such plan is a money purchase pension plan
with a nonintegrated employer contribution rate for each participant of at
least 10 percent of compensation,
(ii) such plan provides for full and immediate
(iii) each employee of the leasing organization
(other than employees who perform substantially all of their services for
the leasing organization) immediately participates in such plan.
Clause (iii) shall not apply to any individual
whose compensation from the leasing organization in each plan year during the
4-year period ending with the plan year is less than $1,000.
For purposes of this paragraph--
(i) Highly compensated employee
The term "highly compensated employee" has the
meaning given such term by section 414(q).
(ii) Nonhighly compensated work force
The term "nonhighly compensated work force"
means the aggregate number of individuals (other than highly compensated
(I) who are employees of the recipient
(without regard to this subsection) and have performed services for the
recipient (or for the recipient and related persons) on a substantially
full-time basis for a period of at least 1 year, or
(II) who are leased employees with respect to
the recipient (determined without regard to this paragraph).
The term "compensation" has the same meaning as
when used in section 415; except that such term shall include--
(I) any employer contribution under a
qualified cash or deferred arrangement to the extent not included in gross
income under section 402(e)(3) or 402(h)(1)(B),
(II) any amount which the employee would have
received in cash but for an election under a cafeteria plan (within the
meaning of section 125), and
(III) any amount contributed to an annuity
contract described in section 403(b) pursuant to a salary reduction
agreement (within the meaning of section 3121(a)(5)(D)).
(6) Other rules
For purposes of this subsection--
(A) Related persons
The term "related persons" has the same meaning as
when used in section 144(a)(3).
(B) Employees of entities under common control
The rules of subsections (b),
(c), (m), and