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Open Enrollment?


Guest jeff100
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Guest jeff100

I have a potential new client who wishes to establish a new Simple Plan. This non-profit nursing home is operated by two different types of employees.

First, there are about 50 regular everyday employees. No problem with these guys.

Secondly, there are about another 50 employees that are employed with this Not-for-profit company for about 12 to 15 months and then they are gone. They are mostly 18 to 20 year olds satisfying a mission requirement.

One of the reasons we are considering a simple is because we can exclude the second group based on the fact that they won't be employed long enough to be able to participate in the plan, thereby eliminating a lot of administration issues.

My question is..... on open enrollment, may we exclude the employees that have not been there for the length of time that the plan document will require? Or on the opening enrollment period, must ALL participate?

Thanks so much for your response. This board is great.

Jeff

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Why would you do an open enrollment? Just follow normal eligibility and you don't have a problem. Once should avoid creating problems for themselves.

However, the type of plan you start will give you problems. If a SEP plan, you could use a 2 year wait, but no employee deferrals. In a SIMPLE you only really have a compensation limit, and an expected limit at that. They should spring for a Qualified plan without open enrollment.

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Guest jeff100

Thanks, RCline for your response. I do appreciate it.

Wouldn't a Simple be more restrictive? I mean, with the Simple, they need $5000 in the two previous years. It seems to me, this is both restrictive with respect to compensation AND length of service. Am I missing this?

Thanks,

Jeff

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Wouldn't a Simple be more restrictive? I mean, with the Simple, they need $5000 in the two previous years. It seems to me, this is both restrictive with respect to compensation AND length of service. Am I missing this?

I think for this set of circumstances you are on the right track. Usually, once you have more than a handful of employees, for one reason or another, a SIMPLE will have unexpected deficiencies relative to a qualified plan.

As for "open enrollment," I don't like the term being applied to qualified plans. You have eligibility requirements and follow them. No "need" to allow everyone in at a particular time because it's just not part of the plan, and to allow it would mean you're not following the terms of the document (unless there is a special plan provision or amendment calling for it).

Ed Snyder

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