Staffing Firm Worker Benefits Act of 1997

Summary: Staffing Firm Worker Benefits Act of 1997 - Amends the Internal Revenue Code to define "employer," in the case of a qualified staffing firm, as the employer of individuals performing services for a customer of the firm for purposes of provisions relating to:  (1) collection of income tax at source on wages; (2) the Federal Insurance Contributions Act; and (3) the Federal Unemployment Tax Act. Defines a "qualified staffing firm" as any person engaged in providing staffing services to a customer under a service contract if, regarding a worker performing services for the customer covered by the contract, the firm has responsibility for payment of wages, handles withholding taxes and benefits, has authority to hire, reassign and dismiss, maintains employee records, and has responsibility for addressing the worker's complaints, claims, filings, or employment-related requests. 
(Sec. 3) Includes in the definition of "employee," for specified provisions relating to various employee benefits, any individual whose employer is a qualified staffing firm.  Treats certain changes in the employment relationship between an individual and a qualified staffing firm (or its customer or former customer) as a termination of employment from the firm (or the customer). 
(Sec. 4) Treats a leased employee as an employee of the recipient of the employee's services and treats contributions or benefits provided by the recipient as provided by the recipient for purposes of provisions relating to qualified pension, profit-sharing, and stock bonus plans.  Sets forth special rules applicable to the leasing organization's plans. 
(Sec. 5) Revises leased employee safe harbor requirements.

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.