switched jobs but not coemployers - 401k rollover denied!

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switched jobs but not coemployers - 401k rollover denied!

Postby rasputin » Thu Jan 10, 2013 12:25 am

I left my job, had two weeks off and started a new job. I want to rollover my 401k from my previous job but i'm told that i can't because both companies use the same coemployer. I'm told that as far as the IRS is concerned, I have the same job.

Is there anything that can be done about this BS?
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Re: switched jobs but not coemployers - 401k rollover denied

Postby Saving$ » Thu Jan 10, 2013 12:38 am

rasputin wrote: I'm told that as far as the IRS is concerned, I have the same job.

Is there anything that can be done about this BS?


...maybe just continue contributing to the same 401k?
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Re: switched jobs but not coemployers - 401k rollover denied

Postby rasputin » Thu Jan 10, 2013 12:42 am

Each company had different 401k plans even though its the same coemployer.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby Dale_G » Thu Jan 10, 2013 1:08 am

Not to hijack, but can you give us an example of a "coemployer"? Fictitious names are okay as long as the relationship is clear.

Thanks,

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Re: switched jobs but not coemployers - 401k rollover denied

Postby CABob » Thu Jan 10, 2013 1:19 am

Dale_G wrote:Not to hijack, but can you give us an example of a "coemployer"? Fictitious names are okay as long as the relationship is clear.

This might help http://www.insperity.com/blog/what-is-co-employment/ but I read it and am still confused or can't picture it in my mind.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Thu Jan 10, 2013 1:46 am

I would assume something like a TriNet or Insperity (formerly Administaff).

@op - I think we need more clarifications at least with fictitious names to help us understand the situation, e.g. I worked in Job A at Company X/Co-employer B with the Company X 401K plan administered by Fidelity and I now work in Job B at Company Y/Still-Co-Employer B with the ???? 401K plan administered by ??.

I've seen PEO's/co-employers where THEY run the plan and ones where your specific employer runs the plan. Also who is telling you that you are not qualified for a rollover? Why? What part of the plan document are they quoting? Etc.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Thu Jan 10, 2013 2:21 am

Also, I can see a quirky outcome where the PEO/co-employer has not yet provided the original 401K plan for original employer X a termination notice and might basically never generate one. That may fix itself in another 2-4 weeks OR it might be a very quirky outcome where as far as the original 401K administrator is concerned you have never been terminated...

That feels broken, and having worked with some PEO's I can see how that could happen and feeling stuck with a lot of finger pointing especially in this fact pattern where you started with another employer/client using the PEO in a short timeframe.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby rasputin » Thu Jan 10, 2013 8:59 am

I was previously working at company X which used Trinet with a 401k administered by transamerica. Now I'm working at company Y which uses Trinet and has a 401k with The Online 401k. I've been told that since Trinet is considered the employer of record as far as the IRS is concerned I still have the same job and can't rollover my transamerica 401k.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby stan1 » Thu Jan 10, 2013 9:55 am

Did you officially quit for the two weeks between jobs, or were you on some form of vacation/unpaid leave?
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Thu Jan 10, 2013 10:10 am

rasputin wrote:I was previously working at company X which used Trinet with a 401k administered by transamerica. Now I'm working at company Y which uses Trinet and has a 401k with The Online 401k. I've been told that since Trinet is considered the employer of record as far as the IRS is concerned I still have the same job and can't rollover my transamerica 401k.


It is true that your employer of record has not changed though I do wonder what the plan documents contemplate for a situation like this. That said, I'm not entirely shocked that you could end up in this weird limbo.

You might try pushing with Transamerica on the contradiction that you are no longer eligible for the Transamerica plan because you are not an employee of X but somehow still in continuous service or some such? What in the plan document allows that paradox? Try getting them to point to the 401K adoption agreement/plan language they believe supports their position.

This might require some time and/or escalation to resolve. You might also want to _try_ the TriNet HRPassport help desk and/or your newco's HR team, no guarantees of help but it is possible...
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Re: switched jobs but not coemployers - 401k rollover denied

Postby inbox788 » Fri May 10, 2013 4:09 am

rasputin wrote:I left my job, had two weeks off and started a new job. I want to rollover my 401k from my previous job but i'm told that i can't because both companies use the same coemployer. I'm told that as far as the IRS is concerned, I have the same job.

Is there anything that can be done about this BS?


Weird situation. As I understand it, coemployment is akin to an indefinite long term assignment from a Temp Agency. Retirement plans at the client companies were never designed with this in mind. I can see you stuck in this limbo until you quit entirely working for the coemployer. At that point, I can see the argument that you have quit all the plans and can rollover all of them.

The coemployer may not have a choice, as I can see that technically, the IRS sees both you and the company as numbers, basically TINs. Just happens your company has dozens or hundreds of 401k plans that are not interchangeable. Don't think folks involved in the plan creation envisioned this quirky situation.

My understanding is the coemployer is the primary employer. What happened at the coemployer when you quit and came back into weeks? Did you do any exit interviews at the coemployer? Sign any dismissal/separation paperwork? Do any time sheets? We're you paid during that time off? Or have to notify coemployer about your absence in any way? How? What happened at the coemployer when you started the new employment? It's very possible you never quit the coemployer and were simply handed a new assignment.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby Frugal Al » Fri May 10, 2013 8:15 am

I love the explanation from the PEO company saying how great these organizations are for employees. It's always good to have an extra layer of confusion in employer/employee relationships, isn't it? These organizations are sometimes abused for cost and convenience, but can be beneficial.

To the OP, does the client company you're working for possibly have two tiers of employees which is confusing the issue? A tier that is under direct employ, and tier employed through the PEO. Since technically you work for the PEO, you wouldn't be able to be on a plan for the direct employees. And as pointed out, you're still employed by the same PEO--nothing has changed.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby Oilburner » Fri May 10, 2013 8:31 am

Request the Summary Plan Description for your old company's 401k. You, as a Plan participant, by law have a right to have a copy (I think you are supposed to have it sent to you yearly, but I never got one without asking). You can get it from the Plan administrator. Review it carefully. It describes how and when money can be withdrawn from the company, among other things. Post here what it says concerning Plan withdrawals.

Have you actually attempted to initiate a rollover, regardless of what you were told? If not, see if it works. Try it via the 401k provider's web site. You could even try a push from the hoped to be new custodian, such as Vanguard by contacting them.

I am assuming your small business uses Trinet's services. If this is incorrect, and you ar/were a Trinet employee, the following does not apply. I googled on Trinet. Wikipedia says, "TriNet (TriNet Group, Inc.) is a professional employer organization (PEO) headquartered in San Leandro, California. It provides HR outsourcing services, including payroll, health benefits, and human capital management for small business owners...." To me this is not the Plan administrator. It is the plan service provider. The service provider will run the web site, collect the contributions, manage the accounts, and for a fee either paid by the employer, or you, in addition to the fund costs you pay. Your SPD will state who the Plan administrator is. Unless you are a direct employee of Trinet and you perform servicing for small business, you are not employed by Trinet. I was in the same situation as you recently (see below). Your plan administrator is probably the head person at the small business you work for.

"I was previously working at company X which used Trinet with a 401k administered by transamerica."

Now I completely understand you wanting to roll over your 401k. I just left an employer who used Transamerica (an insurance company) to supply the funds. This was a 3-person trade association. Our executive director was the Plan administrator. Paychex was the Plan servicer and Transamerica was the funds provider. Transamerica funds are outrageously expensive. They have special "sub-accounts" of major funds and tack on a "wrap" fee of 1 - 1.5%, over the normal fund costs. I was paying 1.68% per year of plan assets for a Vanguard Target Date Retirement fund. Within two weeks of leaving the old job, my money was at Vanguard in my rollover IRA, same fund, ER of 0.17%.

I would do anything I could, if I were you, to get the money moved if your balance is fairly high. I will be enjoying a saving of approximately $4,500 in yearly fees now.
Last edited by Oilburner on Fri May 10, 2013 9:20 am, edited 6 times in total.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby robebibb » Fri May 10, 2013 8:47 am

My wife had a similar thing happen with her employment situation. In her case she is formerly employed by a University and is now employed by a Healthcare organization with the University’s name. There was no employment gap, just a transfer from one to the other. The two entities have two separate plans with slightly different investment options but they are under the same umbrella. We were told that she is unable to roll over funds from one account to the other because she is still employed by the plan sponsor. It makes tracking asset allocation more difficult but no other disadvantages really.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby inbox788 » Fri May 10, 2013 1:05 pm

Oilburner wrote:I am assuming your small business uses Trinet's services. If this is incorrect, and you ar/were a Trinet employee, the following does not apply. I googled on Trinet. Wikipedia says, "TriNet (TriNet Group, Inc.) is a professional employer organization (PEO) headquartered in San Leandro, California. It provides HR outsourcing services, including payroll, health benefits, and human capital management for small business owners...." To me this is not the Plan administrator. It is the plan service provider. The service provider will run the web site, collect the contributions, manage the accounts, and for a fee either paid by the employer, or you, in addition to the fund costs you pay. Your SPD will state who the Plan administrator is. Unless you are a direct employee of Trinet and you perform servicing for small business, you are not employed by Trinet. I was in the same situation as you recently (see below). Your plan administrator is probably the head person at the small business you work for.


Coemployment is a lot more like marriage than the outsourcing HR and other individual responsibilities are split up seem to imply. Deciding who's primarily responsible for what is like custody and divorce. What complicates matters is that these POEs have crossed rubicon and have become the primary employer, while their limitation on functions downplays this very important point. In essence, they own the employee, while the client owns their own separate 401k plan. The poor employee is caught in this limbo.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby save-early-often » Fri May 10, 2013 3:51 pm

What's so special about the new employer 401(k) that's worthy of the rollover? Why not a rollover to a Vanguard IRA?
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Re: switched jobs but not coemployers - 401k rollover denied

Postby leonard » Fri May 10, 2013 5:51 pm

rasputin wrote:I left my job, had two weeks off and started a new job. I want to rollover my 401k from my previous job but i'm told that i can't because both companies use the same coemployer. I'm told that as far as the IRS is concerned, I have the same job.

Is there anything that can be done about this BS?


Make the point moot and just roll over to a low cost IRA - VG, Fidelity, or whoever is low cost and you prefer.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Sun May 12, 2013 5:32 pm

leonard wrote:
rasputin wrote:I left my job, had two weeks off and started a new job. I want to rollover my 401k from my previous job but i'm told that i can't because both companies use the same coemployer. I'm told that as far as the IRS is concerned, I have the same job.

Is there anything that can be done about this BS?


Make the point moot and just roll over to a low cost IRA - VG, Fidelity, or whoever is low cost and you prefer.


Presumably the rollover is being denied because the PEO views the OP as still employed, it is unlikely that an IRA rollover will be allowed if the OP is still viewed as employed...
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Re: switched jobs but not coemployers - 401k rollover denied

Postby leonard » Sun May 12, 2013 9:12 pm

JamesSFO wrote:
leonard wrote:
rasputin wrote:I left my job, had two weeks off and started a new job. I want to rollover my 401k from my previous job but i'm told that i can't because both companies use the same coemployer. I'm told that as far as the IRS is concerned, I have the same job.

Is there anything that can be done about this BS?


Make the point moot and just roll over to a low cost IRA - VG, Fidelity, or whoever is low cost and you prefer.


Presumably the rollover is being denied because the PEO views the OP as still employed, it is unlikely that an IRA rollover will be allowed if the OP is still viewed as employed...


Well, considering this part of the OP post made no sense "because both companies use the same coemployer" - I have no idea what a coemployer, let alone what both companies using one would mean.

So, if the OP changed jobs between 2 companies - that is usually grounds for doing a rollover. If the OP can decrypt "both companies use the same coemployer", then perhaps we can give better advice.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Sun May 12, 2013 10:36 pm

leonard wrote:
Well, considering this part of the OP post made no sense "because both companies use the same coemployer" - I have no idea what a coemployer, let alone what both companies using one would mean.

So, if the OP changed jobs between 2 companies - that is usually grounds for doing a rollover. If the OP can decrypt "both companies use the same coemployer", then perhaps we can give better advice.


Um no offense, but please read the thread. There was the example explanation by Insperity (formerly Administaff) as well as TriNet. (Basically, some mostly smaller companies chose a third party, the co-employer, to act as the employer of record. Your W2 and paystubs come from that company.)

So from the perspective of the 401K plan administrator of CoA/Co-Employer 1, e.g. the Tax ID of the employer of record is unchanged even though the OP now works for CoB/Co-Employer 1, same employer Tax ID, etc.

Most of us figure that this is a bug and not the intended behavior of the plan and it may be being exacerbated because there was no gap in service.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby leonard » Sun May 12, 2013 11:42 pm

JamesSFO wrote:
leonard wrote:
Well, considering this part of the OP post made no sense "because both companies use the same coemployer" - I have no idea what a coemployer, let alone what both companies using one would mean.

So, if the OP changed jobs between 2 companies - that is usually grounds for doing a rollover. If the OP can decrypt "both companies use the same coemployer", then perhaps we can give better advice.


Um no offense, but please read the thread. There was the example explanation by Insperity (formerly Administaff) as well as TriNet. (Basically, some mostly smaller companies chose a third party, the co-employer, to act as the employer of record. Your W2 and paystubs come from that company.)

So from the perspective of the 401K plan administrator of CoA/Co-Employer 1, e.g. the Tax ID of the employer of record is unchanged even though the OP now works for CoB/Co-Employer 1, same employer Tax ID, etc.

Most of us figure that this is a bug and not the intended behavior of the plan and it may be being exacerbated because there was no gap in service.


Um - I work in the staffing and consulting industry. I have heard the arrangements called (1) contracts, (2) vendor contracts, (3) temporary employees, or (4) independent contractors. After 5+ years doing this - I have never heard that arrangement called "co-employer". Ever.

So, if the OP works for a staffing or consulting agency and there was no break in service with that agency - then no it wouldn't be considered a break in service. OP would have to actually quit with the company holding the 401k.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Mon May 13, 2013 9:00 am

leonard wrote:Um - I work in the staffing and consulting industry. I have heard the arrangements called (1) contracts, (2) vendor contracts, (3) temporary employees, or (4) independent contractors. After 5+ years doing this - I have never heard that arrangement called "co-employer". Ever.

So, if the OP works for a staffing or consulting agency and there was no break in service with that agency - then no it wouldn't be considered a break in service. OP would have to actually quit with the company holding the 401k.


No. None of the above, it is co-employment, go look at the link above or google it. The Wikipedia entry on PEO's explains it too: http://en.wikipedia.org/wiki/Profession ... ganization

It is not any of the 4 items you describe. It is a somewhat common practice.

Again, I think most of us believe OP is not being properly treated here, and this is going to require a fair bit of persistence by the OP to untangle since the employer of record has not changed and the gap in service was quite small. This could be as simple as an administrative error, Co-employer never sent a termination notice to Co A/Co-Emp plan or it could be a genuine interpretation issue because since OP is back with co-emp (at Co B) co-emp is not willing to send a termination notice to the Co A/Co-Emp plan.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby jbreitwieser » Mon May 13, 2013 4:26 pm

Hi Rasputin and others - Jock Breitwieser, director corporate communications at TriNet here.
Came across this thread and would like to help.

We're happy to explain the background and help you as much as possible, but without knowing your specific company, this is complicated, as your personal situation may vary depending on the employer. Should you want us to explain the process specific to your situation in this forum, please post your name and name of the previous and the current company you're referencing. Otherwise, we're looking forward to responding directly via email and we'll connect you with one of our consultants. Please send me a direct email to jock.breitwieser@trinet.com. Thanks!
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Re: switched jobs but not coemployers - 401k rollover denied

Postby leonard » Mon May 13, 2013 6:04 pm

JamesSFO wrote:
leonard wrote:Um - I work in the staffing and consulting industry. I have heard the arrangements called (1) contracts, (2) vendor contracts, (3) temporary employees, or (4) independent contractors. After 5+ years doing this - I have never heard that arrangement called "co-employer". Ever.

So, if the OP works for a staffing or consulting agency and there was no break in service with that agency - then no it wouldn't be considered a break in service. OP would have to actually quit with the company holding the 401k.


No. None of the above, it is co-employment, go look at the link above or google it. The Wikipedia entry on PEO's explains it too: http://en.wikipedia.org/wiki/Profession ... ganization

It is not any of the 4 items you describe. It is a somewhat common practice.

Again, I think most of us believe OP is not being properly treated here, and this is going to require a fair bit of persistence by the OP to untangle since the employer of record has not changed and the gap in service was quite small. This could be as simple as an administrative error, Co-employer never sent a termination notice to Co A/Co-Emp plan or it could be a genuine interpretation issue because since OP is back with co-emp (at Co B) co-emp is not willing to send a termination notice to the Co A/Co-Emp plan.


I read the PEO link. It is basically another name for a temp or contractor. Temps are paid by one company and do work for another. It's a temp. "Co-employment" must confer the ability to not have to use "temp" on your resume in the future.

Anyway, the OP would need a break in employment from the PEO company in order to do a rollover. No break in employment from the employer, no rollover. Unless the 401k allows for an inservice rollover - which doesn't seem to apply here.

And, yet another reason why keep it simple applies to more than just investing.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Mon May 13, 2013 10:06 pm

leonard wrote:I read the PEO link. It is basically another name for a temp or contractor. Temps are paid by one company and do work for another. It's a temp. "Co-employment" must confer the ability to not have to use "temp" on your resume in the future.

Anyway, the OP would need a break in employment from the PEO company in order to do a rollover. No break in employment from the employer, no rollover. Unless the 401k allows for an inservice rollover - which doesn't seem to apply here.

And, yet another reason why keep it simple applies to more than just investing.


No.

It is not.

If you want to misunderstand co-employment so be it. But it is not another name for a temp or contractor. Many venture capital backed companies use PEOs when they are younger.

Co-employment is a mechanism for (mostly) smaller companies to have a (mostly) permanent workforce and employee benefits more comparable to much larger companies by leveraging the HR systems, buying power and expertise of the PEO. Some PEO's provide the entire HR department to the smaller company.

Just to be clear EVERY single employe from the smaller company from the CEO down to the lowest employee on the totem pole are all co-employed by the PEO. Do you really think the CEO is a temp or contractor?
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Mon May 13, 2013 10:07 pm

jbreitwieser wrote:Hi Rasputin and others - Jock Breitwieser, director corporate communications at TriNet here.
Came across this thread and would like to help.

We're happy to explain the background and help you as much as possible, but without knowing your specific company, this is complicated, as your personal situation may vary depending on the employer. Should you want us to explain the process specific to your situation in this forum, please post your name and name of the previous and the current company you're referencing. Otherwise, we're looking forward to responding directly via email and we'll connect you with one of our consultants. Please send me a direct email to jock.breitwieser@trinet.com. Thanks!


Awesome customer service Jock!
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Re: switched jobs but not coemployers - 401k rollover denied

Postby LadyGeek » Mon May 13, 2013 10:34 pm

^^^ Please don't post personal information in the forum. Remember that information posted here will appear in google search results, which will be linked to information you may have posted elsewhere. Direct email is best.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby neurosphere » Tue May 14, 2013 9:50 am

Good luck with your issue. I have seen this same problem come up in hospital settings where people transfer from the "university" to the "college" of a medical center, or something like that.

I had a different yet related situation where I was switching from one job designation to another. No change in employer, just an administrative department change. What they did was "terminate" me from one job, and then "hire" me in the next. I think this was an administrative error. However, in trying to get it all corrected, there was a gap between the termination and the re-hiring (in the paperwork, but I did not have any days off). I was able to roll my 401k over to an IRA at Vanguard. Then, when the paperwork went through for the new position, I was paid retroactively, but my 401k was set-up anew with a zero balance. In this way I was able to get my high-fee 401k moved even though I most certainly did not change employers. I had to go almost 6 weeks without a paycheck due to the kerfluffle, but it was worth it in retrospect to be able to get the money out to Vanguard.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby leonard » Tue May 14, 2013 5:55 pm

JamesSFO wrote:
leonard wrote:I read the PEO link. It is basically another name for a temp or contractor. Temps are paid by one company and do work for another. It's a temp. "Co-employment" must confer the ability to not have to use "temp" on your resume in the future.

Anyway, the OP would need a break in employment from the PEO company in order to do a rollover. No break in employment from the employer, no rollover. Unless the 401k allows for an inservice rollover - which doesn't seem to apply here.

And, yet another reason why keep it simple applies to more than just investing.


No.

It is not.

If you want to misunderstand co-employment so be it. But it is not another name for a temp or contractor. Many venture capital backed companies use PEOs when they are younger.

Co-employment is a mechanism for (mostly) smaller companies to have a (mostly) permanent workforce and employee benefits more comparable to much larger companies by leveraging the HR systems, buying power and expertise of the PEO. Some PEO's provide the entire HR department to the smaller company.

Just to be clear EVERY single employe from the smaller company from the CEO down to the lowest employee on the totem pole are all co-employed by the PEO. Do you really think the CEO is a temp or contractor?


Last post on this - we likely aren't going to agree. If you want to continue - feel free to PM me.

A temp or contractor is employed by company A to do work for company B.

A PEO is employed by company A to do work for company B. The only reason that companies seem to do this is tax arbitrage for SUTA. But, in every other key dynamic, this relationship is essentially like a temp or contract arrangement. The worker works for and is paid by 1 company, but does work for a different company. That statement applies equally well to PEO employee or temp/contractor.

You claim I am misunderstanding. I would argue I am cutting through the complexity to get at the essential parallels.

feel free to PM if you would like to discuss further.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Tue May 14, 2013 11:18 pm

leonard wrote:
Last post on this - we likely aren't going to agree. If you want to continue - feel free to PM me.

A temp or contractor is employed by company A to do work for company B.

A PEO is employed by company A to do work for company B. The only reason that companies seem to do this is tax arbitrage for SUTA. But, in every other key dynamic, this relationship is essentially like a temp or contract arrangement. The worker works for and is paid by 1 company, but does work for a different company. That statement applies equally well to PEO employee or temp/contractor.

You claim I am misunderstanding. I would argue I am cutting through the complexity to get at the essential parallels.

feel free to PM if you would like to discuss further.


If you think you are cutting through complexity you are not, you are just getting it wrong. This is not about tax arbitrage for unemployment (SUTA) or other forms of taxes.

Take the VC-funded startup scenario, StartupCo, you have two basic ways of hiring people to do work for you in your world. They get hired by StartupCo and get pay+W-2's from StartupCo as well as health care, options packages, etc -EXCLUSIVE OR- they are temps/contractors in which case they get 1099s as no health care, options (or much harder), etc.

If we stick with the employee route then StartupCo must directly staff a payroll/HR department, purchases individual functions from vendors, or hire specific individuals temps/contractors to do those functions.

Given that you want to hire actual employees and give them StartupCo-stock options as well as a nice benefits package, if you went to a temp-style agency like say an Adecco, to try to hire the entire C-suite as well as every employee that wouldn't work so well.

Further, you would quickly run into the Microsoft perma-temp problem.

In co-employment you are trying to have employees AND allocate responsibilities for supporting the employees with the PEO. One consequence of the allocation is that paystubs come from the PEO's Tax-ID. That doesn't make it the same as temping.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby BrandonBogle » Wed May 15, 2013 1:21 am

My mom worked for a company who was bought by a competitor. The company used ADP TotalSource as a PEO. Her boss was the new company, they picked her role, they decided her duties, they promoted her, all within the company. They had specific health insurance and retirement benefits in the name of the new company/competitor. However, her paycheck a and W2 had ADP TotalSource on them. Her HR contacts were NOT ADP except if it was payroll related, or as we later learned, disability related. While her health insurance was with her company, disability insurance was provided from ADP.

This does sound a lot like a temp agency, but it is not. She cannot change "contracts" and such. And when it came time for her to leave, the paperwork made NO MENTION of ADP, just her company.

More info from the horse's mouth: http://www.adp.com/solutions/employer-s ... ource.aspx
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Wed May 15, 2013 8:32 am

BrandonBogle wrote:My mom worked for a company who was bought by a competitor. The company used ADP TotalSource as a PEO. Her boss was the new company, they picked her role, they decided her duties, they promoted her, all within the company. They had specific health insurance and retirement benefits in the name of the new company/competitor. However, her paycheck a and W2 had ADP TotalSource on them. Her HR contacts were NOT ADP except if it was payroll related, or as we later learned, disability related. While her health insurance was with her company, disability insurance was provided from ADP.

This does sound a lot like a temp agency, but it is not. She cannot change "contracts" and such. And when it came time for her to leave, the paperwork made NO MENTION of ADP, just her company.

More info from the horse's mouth: http://www.adp.com/solutions/employer-s ... ource.aspx


Yep, this is how PEO's work. It's not temping/contracting, it's not a company avoiding having in employees, it's sharing the responsibilities for certain tasks with a second company.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby leonard » Wed May 15, 2013 5:39 pm

JamesSFO wrote:
leonard wrote:
Last post on this - we likely aren't going to agree. If you want to continue - feel free to PM me.

A temp or contractor is employed by company A to do work for company B.

A PEO is employed by company A to do work for company B. The only reason that companies seem to do this is tax arbitrage for SUTA. But, in every other key dynamic, this relationship is essentially like a temp or contract arrangement. The worker works for and is paid by 1 company, but does work for a different company. That statement applies equally well to PEO employee or temp/contractor.

You claim I am misunderstanding. I would argue I am cutting through the complexity to get at the essential parallels.

feel free to PM if you would like to discuss further.


If you think you are cutting through complexity you are not, you are just getting it wrong. This is not about tax arbitrage for unemployment (SUTA) or other forms of taxes.

Take the VC-funded startup scenario, StartupCo, you have two basic ways of hiring people to do work for you in your world. They get hired by StartupCo and get pay+W-2's from StartupCo as well as health care, options packages, etc -EXCLUSIVE OR- they are temps/contractors in which case they get 1099s as no health care, options (or much harder), etc.

If we stick with the employee route then StartupCo must directly staff a payroll/HR department, purchases individual functions from vendors, or hire specific individuals temps/contractors to do those functions.

Given that you want to hire actual employees and give them StartupCo-stock options as well as a nice benefits package, if you went to a temp-style agency like say an Adecco, to try to hire the entire C-suite as well as every employee that wouldn't work so well.

Further, you would quickly run into the Microsoft perma-temp problem.

In co-employment you are trying to have employees AND allocate responsibilities for supporting the employees with the PEO. One consequence of the allocation is that paystubs come from the PEO's Tax-ID. That doesn't make it the same as temping.


Doing work for one company. Check cut by another company. Call it a "rose", "PEO", or whatever you want.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.
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Re: switched jobs but not coemployers - 401k rollover denied

Postby JamesSFO » Wed May 15, 2013 8:47 pm

Note I added small edits in brackets to reference back.

leonard wrote:Doing work for one company [e.g. StartupCo or Company X]. Check cut by another company [e.g. PEO]. Call it a "rose", "PEO", or whatever you want.


Ok in your world how do you get the employees at StartupCo/PEO into 401K plan #1 [edit to clarify: run solely by StartupCo] while the Company X/PEO emps are in 401K plan #2 [edit to clarify: run solely by Company X] without running into all problems with ERISA and testing?

Similarly how would you handle the Microsoft temp problem for the StartupCo giving the "temps employed by the PEO" direction?

You keep glossing over these issues that would be problematic in your rush to fit the relationship into something you are familiar with.
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