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Yuck. Tell him to roll his own money to an IRA and make the investment and not taint the plan.

Owners child works part-time and has not met 1,000 hours in 12 months, but they are now an LTPT. I can exclude LTPTs from ADP testing. So the kid can contribute 50% of pay, right? Is this too good to be true?? Maybe there is something that says otherwise but it's something that never even crossed my mind until I saw it happen this morning..

Maybe it’s easier to ignore whichever document anyone suggests. If the plan’s provisions need not be written in the thing tax law calls “the” plan document until the end of a remedial-amendment period, why not wait? If a service provider requires an instruction on what to assume in performing its services, the plan’s administrator might deliver a service instruction (but the plan sponsor can avoid an unnecessary formality, and might avoid several premature obligations).

Stated differently, the definition of compensation used for deferrals only has to be reasonable unless it's applying the default % under a QACA. As CuseFan pointed out, this may be an operational issue depending on how the plan defines compensation for deferral purposes. If the plan excludes bonuses for deferral purposes, then there is no operational error, even if the definition of comp for that purpose doesn't satisfy 414(s). Of course you must use a definition of compensation that satisfies 414(s) for ADP testing purposes, but that's a separate issue.

So austin3515 finds something to like in the long-term-part-time provision?!

That was just a crazy example where absent this rule the testing would be catastrophic, LOL. This is really kind of neat and may be a great reason to adopt the LTPT rules in certain cases.

yes. The feedback I've gotten from small plan sponsors has been just this kind of scenario. A relative of the owners hasn't been able to be part of the plan, but will be able to due to the LTPT rules and they are excited for the opportunity to defer. Why the 50% of pay restriction? Is that part of the LTPT rules? I haven't seen that, but could be I missed it. Or does the specific plan have a restriction? Most all the plans I work with allow up to the 402(g) limit.

I believe the proposed regs say that if you have elapsed time, as long as the waiting period isn't longer than12 months, then LTPT doesn't apply anyway?

Exactly right. And... those six words are breathtakingly poor documentation for any divorce decree and/or property settlement.

I think that is a question for your lawyer and her lawyer to debate. No one can answer that question based on the 6 words you provided.

None of these people meet the statutory eligibility of 410(a). So test them separately.

Yes, provided Plan Section 1.28(f) provides for such employees entry into the Plan upon completion of 1000 hours in a computation period.

I think this is your biggest problem, unless there is more to the exclusion language (e.g., unless/until they work 1000 hours). Assuming the plan has the proper language I think you can exclude from testing. If not, they might be otherwise excluded from testing but participation and contributions in the plan would be governed by plan terms.

Yeah the rollout of their new platform has been less than stellar to be kind about it.