A basic question when establishing a qualified retirement plan is, "Who should be included in the plan and when?" Only common law employees can be included in an employer's qualified retirement plan. Board of director members and shareholders are not eligible to participate in corporate plans unless, of course, they are also employees of the corporation. In the case of partnerships and sole proprietorships, the owners are considered employees for most retirement plan purposes. Owner-employees must meet the same requirements as established for other employees in order to participate in the plan.
The regulations work to ensure a fair number of employees are covered, but does not mean everyone has to be covered. Clearly, the question of coverage must be carefully studied with any type of plan considered by a businessowner.
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