Jump to content

Exclusion of Students for Coverage Testing


Guest Lane
 Share

Recommended Posts

Are students (of a plan sponsor university) excludable employees for 410(b) coverage testing purposes when testing matching and other employer contributions? I find no support in the Code or regs for this, but I've read uncited commentary indicating you can exclude students and disregard them for coverage testing purposes.

I understand they are excludable for universal availability, but don't find the same exclusion for employer contribution testing.

Thanks

Link to comment
Share on other sites

Guest ebgroup
Are students (of a plan sponsor university) excludable employees for 410(b) coverage testing purposes when testing matching and other employer contributions? I find no support in the Code or regs for this, but I've read uncited commentary indicating you can exclude students and disregard them for coverage testing purposes.

I understand they are excludable for universal availability, but don't find the same exclusion for employer contribution testing.

Thanks

Check 1.403(b)-5(a)(3), you will have to follow all the cross references, there may be a separate test for that group, but it should answer the question.

Link to comment
Share on other sites

Thank you. I had not seen that reference. It seems strange that they include the sentence regarding exclusion of these employees in a paragraph titled "Compensation for testing".

Link to comment
Share on other sites

Are students (of a plan sponsor university) excludable employees for 410(b) coverage testing purposes when testing matching and other employer contributions? I find no support in the Code or regs for this, but I've read uncited commentary indicating you can exclude students and disregard them for coverage testing purposes.

I understand they are excludable for universal availability, but don't find the same exclusion for employer contribution testing.

Thanks

There is a flush paragraph at then end of IRC 403(b)(12)(A) which excludes students who are employed by the college from requirements of subparagraph A. See last sentence of paragraph.

mjb

Link to comment
Share on other sites

  • 7 years later...

I have always found this issue a little convoluted. Specifically regarding 410(b) coverage testing on a 501(c)(3) ERISA 403(b) plan that includes employer contributions:

If I understand this correctly, if you have the "less than 20 hour per week exclusion" these employees are also disregarded for coverage testing on the employer contribution. For example, 6 NHC employees, one is excluded under the 20 hour exclusion - when determining the coverage testing group under 410(b), this person is excluded, so there would only be 5 NHC to consider for the 401(b) testing. Of course, if they ever work 1000 hours, then they move out of this excluded class and would then be considered.

Comments?

Link to comment
Share on other sites

Belgarath,  What are the eligibility requirements for the other employees?  1.403(b)-5(a)(1) says that employer contributions in a 403(b) are subject to 410(b) in the same manner as a qualified plan under 401(a).  1.410(b)-6(b)(2) addresses what happens if there are multiple age/service requirements.  They are only excludable if they fail to satisfy all of the different age/service requirements in the plan.  I would consider the <20 hour per week exclusion as an age/service requirement.  For example, if the >20 hour per week people are immediately eligible for the employer contribution, I read this as saying the <20 hour people are not excluded from the 410(b) test.

If they are not excludable employees, I would expect most, if not all of the <20 hour per week people to be in the otherwise excludable group that can be tested separately.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...