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FWIW, my interpretation in the absence of specific document language would be all compensation for hours on which overtime pay is included. If you are getting overtime pay on all hours over 40, then to me, all of those hours are overtime, and you would exclude it all, not just the extra 50%.

first, remember, I am a Grinch, so such a plan design sounds like something I could dream about you might want to check what the IRS said just a few months ago. https://www.irs.gov/retirement-plans/discriminatory-plan-designs-using-short-service this is just the last portion of the comments. Almost word for word the situation you are describing! Plans may discriminate even though they allocate a larger percentage of compensation to NHCEs. With this design, NHCEs, on average, may seem to receive a misleadingly large accrual or allocation level. For example, an NHCE participant with $200 of annual compensation may receive a profit sharing allocation of $200 (a benefit equal to 100% of compensation), while an HCE with compensation of $200,000 may receive a benefit of only 25% of compensation or $50,000. Although these designs may allow the plan to satisfy the vesting or numeric general tests for nondiscrimination and the associated regulations, they don’t satisfy Treas. Reg. Section 1.401(a)(4)-1©(2), which requires that the provisions of Sections 1.401(a)(4)-1 through 1.401(a)(4)-13 be reasonably interpreted to prevent discrimination in favor of HCEs. Page Last Reviewed or Updated: 01-Apr-2016 as the IRS says, yes, through the formulas and everything else giving a low paid NHCE 100% of comp 'works' it violates a reasonable interpretation to prevent HCEs from favored treatment. I think the killer is your opening statement "I am designing a new..."

Eligibility is not a protected benefit. If he's excluded and not eligible he doesn't get a TH minimum.

I think that is what is going on; the 404a fee disclosures are really requirements under 404©. And if we're being picky, why do you keep calling it 404©? Is it copyrighted or something?