[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1891 Introduced in House (IH)]
105th CONGRESS
1st Session
H. R. 1891
To amend the Internal Revenue Code of 1986 to codify the employer
status of staffing firms with respect to their workers for purposes of
employment taxes and for employee benefit purposes, to clarify and
enhance the ability of such firms to sponsor retirement and other
employee benefit plans, and to facilitate the nonabusive use of such
firms' services by other businesses.
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IN THE HOUSE OF REPRESENTATIVES
June 12, 1997
Mr. Portman (for himself and Mr. Cardin) introduced the following bill;
which was referred to the Committee on Ways and Means
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A BILL
To amend the Internal Revenue Code of 1986 to codify the employer
status of staffing firms with respect to their workers for purposes of
employment taxes and for employee benefit purposes, to clarify and
enhance the ability of such firms to sponsor retirement and other
employee benefit plans, and to facilitate the nonabusive use of such
firms' services by other businesses.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Staffing Firm Worker Benefits Act of
1997''.
SEC. 2. CODIFICATION OF EMPLOYER STATUS OF QUALIFIED STAFFING FIRM FOR
EMPLOYMENT TAX PURPOSES.
(a) Income Tax Withholding.--Section 3401(d) of the Internal
Revenue Code is amended--
(1) in paragraph (1), by striking ``and'' at the end;
(2) in paragraph (2), by striking the period and inserting
``, and''; and
(3) by adding at the end the following:
``(3) notwithstanding any provision in this subtitle to the
contrary, in the case of a qualified staffing firm, described
in section 7701(a)(47), paying wages to an individual
performing services for a customer of such qualified staffing
firm, the term `employer' means such qualified staffing firm
(and not the customer).''.
(b) FICA Tax.--Section 3121 of the Internal Revenue Code is amended
by adding at the end the following:
``(z) Application to Qualified Staffing Firms.--In the case of a
qualified staffing firm, described in section 7701(a)(47), paying wages
to an individual performing services for a customer of such qualified
staffing firm, the term `employer' means such qualified staffing firm
(and not the customer), notwithstanding any provision in this subtitle
to the contrary.''.
(c) FUTA Tax.--Subsection (a) of section 3306 of the Internal
Revenue Code is amended by adding at the end the following: ``In the
case of a qualified staffing firm, described in section 7701(a)(47),
paying wages to an individual performing services for a customer of
such qualified staffing firm, the term `employer' means such qualified
staffing firm (and not the customer), notwithstanding any provision in
this subtitle to the contrary.''.
(d) Definition--Subsection (a) of section 7701 of the Internal
Revenue Code is amended by adding at the end the following paragraph--
``(47) Qualified Staffing Firm.--The term `qualified staffing firm'
means any person that is engaged in providing staffing services to a
customer pursuant to a service contract, and that with respect to a
worker performing services for the customer who is covered by the
contract--
``(A) Assumes responsibility for payment of wages to the
worker, without regard to the receipt or adequacy of payment
from the customer for such services,
``(B) Assumes responsibility for reporting, withholding,
and paying any applicable taxes under Chapters 21, 23, and 24,
with respect to the worker's wages, without regard to the
receipt of adequacy of payment from the customer for such
services,
``(C) Assumes responsibility for any worker benefits that
may be required by the service contract, without regard to the
receipt or adequacy of payment from the customer for such
services,
``(D) Assumes authority to hire, reassign, and dismiss the
worker and has the contractural right to exercise this
authority independent of the customer,
``(E) Maintains employee records relating to the worker,
and
``(F) Assumes responsibility for addressing the worker's
complaints, claims, filings, or requests relating to
employment, except as otherwise provided by applicable
collective bargaining agreements, if any, notwithstanding that
some or all of the actions described in this subparagraph may
be shared by the customer.''.
SEC. 3. CODIFICATION OF EMPLOYER STATUS OF QUALIFIED STAFFING FIRM FOR
PURPOSES OF PROVIDING EMPLOYEE BENEFITS.
Paragraph (20) of section 7701(a) of the Internal Revenue Code is
amended--
(1) by redesignating the text of such paragraph as
subparagraph (A);
(2) by adding the heading ``(A) Full-time life insurance
salesman.--'' at the start of new subparagraph (A); and
(3) by adding at the end of paragraph (20) the following:
``(B) Individual covered by qualified staffing firm
contract.--For the purpose of applying the provisions
of section 79 with respect to group-term insurance
purchased for employees, for the purpose of applying
the provisions of sections 104, 105, and 106 with
respect to accident and health insurance or accident
and health plans, for the purpose of applying the
provisions of this title with respect to contributions
to or under a trust which is a part of a plan described
in section 401(a) (other than a defined benefit plan),
or to or under a plan described in section 403(a)
(other than a defined benefit plan), including for this
purpose elective contributions under section 401(k) and
employee contributions and matching contributions under
section 401(m), with respect to a tax-exempt status of
a trust forming a part of such plan, and with respect
to the tax-exempt status of a trust forming a part of
such plan, and with respect to distributions under such
a plan, or by a trust forming part of such a plan, for
the purpose of applying section 125 with respect to
cafeteria plans, for the purpose of applying section
127 with respect to educational assistance programs,
for the purpose of applying section 129 with respect to
dependent care assistance programs, for the purpose of
applying the provisions of section 414(n), and for the
purpose of applying the provisions listed in section
414(n)(3), with respect to such other benefits, plans,
or programs as are described in section 414(n)(3), the
term `employee' shall include, with respect to a
qualified staffing firm, any individual whose employer
is considered to be the qualified staffing firm for the
purpose of Chapters 21, 23, and 24. For these purposes,
a change in the employment relationship between an
individual and a qualified staffing firm or between the
individual and a customer or former customer of the
qualified staffing firm, as the cause may be, whereby
the individual becomes or ceases to be an employee of
the qualified staffing firm under this subparagraph,
shall be treated as the termination of employment and
separation from service by the individual from the
employment or service of the qualified staffing firm's
customer or the qualified staffing firm, as the case
may be.''.
SEC. 4. COVERAGE OF LEASED EMPLOYEES IN EMPLOYMENT BENEFIT PLANS.
(a) Application of Requirements Concerning Cash or Deferred
Arrangements, Matching Contributions, and Employee Contributions to
Leased Employees.--Section 414(n)(3)(B) is amended by inserting
``401(k), 401(m)'' before ``408(k)''.
(b) Special Rules for Leasing Organization's Plan.--Section 414(n)
is amended--
(1) by renumbering paragraph (6) as paragraph (7); and
(2) by inserting the following as paragraph (6):
``(6) Leasing organization's plan.--
``(A) Elective disaggregation.--
``(i) General rule.--A leasing organization
that is a qualified staffing firm may elect,
for any year, to have a plan that it sponsors
and that is described in section 401(a) or
403(a) treated as maintained by more than one
employer for purposes of applying sections
410(b) and 401(a)(4). For these purposes, (I)
all the employees who perform services directly
for a recipient and related persons and who
would be treated as leased employees of the
recipient but for the requirements of paragraph
(2)(B), shall be treated as employed by that
recipient, and (II) all employees who do not
meet the requirements of subclause (I) shall be
treated as employed by the leasing
organization. Such leasing organization may
also elect, for any year, to have a plan that
is subject to section 105(h)(3) and (4), or to
section 125(c), tested on a comparable basis
under section 105(h)(3) and (4), or under
section 125(c), as the case may be.
``(ii) Special rules.--A leasing
organization electing under this paragraph
(6)(A) may, under regulations prescribed by the
Secretary, elect in the alternative to have
subclause (I) of paragraph (6)(A)(i) applied
(I) to all employees who perform services
directly for the recipient and the related
persons, whether or not they would be treated
as leased employees of the recipient, or (ii)
only with respect to selected recipients and
related persons. Notwithstanding the foregoing,
in the event that a five-percent owner (as
defined in section 416(i)) of a recipient is
covered by a plan described in paragraph
(6)(A)(i), then such leasing organization shall
be deemed to have elected disaggregation in
accordance with subclause (ii) of this clause
with respect to such recipient and related
persons.
``(iii) Effect of disqualification.--If the
plan of a leasing organization electing under
this paragraph (6)(A) fails to satisfy the
requirements of section 410(b) or section
401(a)(4) with respect to the person deemed to
be the employer under paragraph (6)(A), only
that portion of the plan that is treated under
paragraph (6)(A) as maintained by such person
shall be disqualified.
``(iv) Treatment of related persons.--For
purposes of this subparagraph (A), the term
``recipient'' shall not include any person that
is a related person with respect to the leasing
organization.
``(B) Highly compensated employees.--Whether or not
the leasing organization makes an election under
subparagraph (A), section 414(q) shall be applied to
employees of a leasing organization that is a qualified
staffing firm by treating the employees who perform
services for a recipient or related persons and who
would be leased employees of the recipient but for the
requirements of paragraph (2)(B) as employed by, and
receiving compensation from, the recipient or the
related person for purposes of determining whether the
employees are highly compensated employees of the
leasing organization.''.
SEC. 5. REVISIONS TO SAFE HARBOR PROVISION.
(a) Revisions to Safe Harbor Plan Requirements.--Subparagraph (B)
of section 414(n)(5) of the Internal Revenue Code is amended to read as
follows:
``(B) Plan Requirements.--A plan meets the requirements of this
subparagraph if--
``(i) such plan is a money purchase pension plan or a
profit-sharing plan, with a nonintegrated employer contribution
rate for each participant which is at least 7.5 percent of that
portion of the participant's compensation attributable to
services performed for the recipient, and which is not
dependent on the current or accumulated points of the leasing
organization or on whether the participant makes an elective
contribution or employee contribution to such plan.
``(ii) such plan provides for full and immediate vesting,
``(iii) if the plan is a profit-sharing plan, such plan
meets the distribution requirements of section 401(k)(2)(B)
with respect to all employer contributions, and
``(iv) each employee of the leasing organization who
performs services for the recipient immediately participates in
such plan.''.
(b) Extension of Safe Harbor Rule to Additional Employee
Benefits.--Paragraph (5) of Section 414(n) of the Internal Revenue Code
is amended by adding at the end the following:
``(D) Special rule for additional employee benefits.--To
the extent provided for in regulations issued by the Secretary,
in the case of a requirement described in subparagraph (C) of
paragraph (3), this subsection shall not apply to any leased
employee with respect to service performed for a recipient if--
``(i) such employee is covered by a plan for an
arrangement that is maintained by the leasing
organization and that meets such requirements as the
Secretary shall prescribe in regulations, 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.''.
SEC. 6. EFFECTIVE DATE.
The amendments made by this Act shall take effect on the date of
the enactment of this Act. In the case of a plan that covers employees
of a qualified staffing firm who are providing services for a customer
pursuant to a service contract and that was adopted and in effect
before the date of enactment of this Act, such amendments shall not
take effect until the first day of the first plan year that begins
after the date of enactment of this Act, and the plan shall not be
required to be amended to reflect this Act until the end of such plan
year.
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