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"20 hour exclusion"


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Just want to see if you agree with my interpretation. Plan with many operational violations. The plan does NOT provide for the 20 hour exclusion, but they have been operating as if it did.

Now, since employees were incorrectly excluded form deferring, there will have to be make-up contributions, etc.

My question is this - under 1.403(b)-5(b)(4)(i), if any employee in the "less than 20 hour" exclusion category is permitted to participate, then no one in that category may be excluded. So, in this case, since some of the "under 20 hour" folks are going to have to participate since they weren't previously excluded, then this precludes amending the document for future years to institute this exclusion? Or have I got that wrong?

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16 hours ago, Belgarath said:

My question is this - under 1.403(b)-5(b)(4)(i), if any employee in the "less than 20 hour" exclusion category is permitted to participate, then no one in that category may be excluded. So, in this case, since some of the "under 20 hour" folks are going to have to participate since they weren't previously excluded, then this precludes amending the document for future years to institute this exclusion? Or have I got that wrong?

Belgarath, I think the "once in, you're never out" rule only applies to employees who work 1,000 hours in their first 12-month period. It does not seem to me that you could not add the 20-hour per week rule and apply it going forward to folks who don't hit the 1,000 hour mark.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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