Leaderboard

The wording here confuses me a little - I'm going to assume you mean that the employee met the 1,000 hours of service required to enter the plan in one year, but has not and is not expected to complete 1,000 hours of service in any later year. Otherwise your post does not make sense. Since the employee has met the plan's eligibility requirements, they will continue to be a participant for as long as they are an employee, and will be non-excludable for purposes of the coverage and nondiscrimination tests. So they have to receive whatever contributions are necessary to satisfy those tests. They could be required to receive a top heavy minimum contribution, too. Even if they never attain 2 years of vesting service, they could still become vested if they reach the plan's normal retirement age, or if the plan terminates. The one-time irrevocable waiver of participation would not be of any help in this case, as it a) must be executed before the employee first becomes eligible in any plan of the employer, and b) does not get you a free pass on coverage; the employee who waived participation is treated as non-excludable and not benefiting in the coverage test. This situation could have been avoided by designing the plan with the 2-year eligibility rule, but it is too late for that now.

You'll have a testing failure if you don't cover her. Plan "may" allow irrevocable election to "opt out" but it must be executed prior to the participant becoming eligible. Though I would recommend against this because you still need to include them in testing and if your only NHCE is receiving $0 and has irrevocably elected out of the plan, I don't know how you fix that testing failure. Why not just 100% vest her and move on? I mean how much can an employee who doesn't work 1000 per year cost? There are at least 3 conditions where she would become 100% despite not working 1000 hours in the future - 1 - she attains the Plan's NRA while employed. 2 - she is affected by a Partial Plan termination. 3 - the Plan is terminated requiring full vesting. There may be others I'm missing.

Peter: Correct 3.5% on the first 6% of deferral for the match. Matching contribution of: 100% of an employee's contribution up to 1% of compensation and a 50% matching contribution for the employee's contributions above 1% of compensation and up to 6% of compensation; or Nonelective contribution of 3% of compensation to all participants, including those who choose not to contribute to the plan. Employee's salary of $80,000 deferring 10% the match is: 100% on the first 1% of $80,000 = $800 50% on the next 5% of $4,000 = $2,000 Total match $2,800 = 3.50% of $80,000