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By Benetrends • January 12, 2014

Ensuring Status as an Employee

It is very important to be properly considered an employee for qualified retirement plan purposes. Following are some helpful tips on this topic:

    • A qualified plan may only provide benefits for employees and their beneficiaries. An employee for this purpose, and with respect to the majority of Benetrends clients, generally means a "common law employee" employed or formerly employed by the employer that maintains the plan. This may also include employees of "related employers," as determined under the IRS controlled and/or affiliated service group rules.
    • Only an employee may roll funds into a qualified plan. In some cases, the employee must also be a plan participant (first reaching the plans applicable eligibility and entry requirements).
    • An employee needs to have appropriate compensation for plan purposes in order to make or receive plan contributions.
    • All employees must complete a Form W-4 so that the employer can withhold the correct federal income tax from their pay.
    • A C Corporation generally must compensate employees with wages reported on Form W-2 and must also file the appropriate quarterly and annual payroll tax returns, using Forms 940, 941, 945, and W-3.