2018 Year-End Tips – Census

EMPLOYEE CENSUS INFORMATION – What needs to be included for accurate reporting?

Completing the employee census information is vital to performing accurate retirement plan testing and reporting. It is important to know who to include and who, if anybody, can be left off of the employee census information. Omitting or incorrectly reporting compensation for just one employee can result in inaccurate test results.

Generally speaking, all employees who received compensation from the plan sponsor or any participating employer during the plan year should be included in the employee census information. All employees should be included, regardless of their plan eligibility status.

Required to be reported: NOT required to be reported:
  • Every employee whose income will be reported on a W-2 for the plan year (including union, part-time, seasonal, and excluded classes of employees);
  • Sole proprietors whose income may be reported on Schedule C of IRS Form 1040;
  • Members of a partnership whose income may be reported on Schedule K-1 to IRS Form 1065;
  • Leased, contract, or temporary employees paid by a third party who perform work for the plan sponsor during the plan year.
  • Independent contractors whose compensation is reported on IRS Form 1099.

 

Part Time/Temporary Employees
A common misconception is that “part-time” or “temporary” employees are not eligible to participate in a retirement plan. If any employee not specifically excluded by classification in the plan document meets the age and service requirements, they are eligible to enter the plan on the next entry date even if classified as “part-time” or “temporary.”

For example, if your plan has a 1 year of service and 1,000 hours requirement, an employee (including “part-time” or “temporary” employees) who worked 1,000 hours or more during the eligibility computation period is eligible unless they are specifically excluded by definition in the plan document. Consequently, if a “part-time” employee works 20 hours per week every week for a year, they would end up with 1,040 hours and would be eligible to participate.

Leased Employees
A leased employee who is not a common law employee must generally be treated as an employee for retirement plan purposes if he or she does all the following:

  • Provides services to the employer under an agreement between the employer and a leasing organization;
  • Has performed services for the employer substantially full time for at least 1 year (generally defined as 1,500 hours in a 12 month period); and
  • Performs services under the employer’s primary direction or control.

The Plan Document can exclude leased employees as a class if such exclusion is specifically elected and the plan passes coverage testing.