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When drafting plan provisions related to changes to exclusion by classification, be sure to address what happens in situations such as: a participant is hired into a covered classification and then at a future point in time the participant starts working in an excluded classification. a participant is hired into an excluded classification and then at a future point in time the participant starts working in a covered classification. if a participant worked in a classification that was covered, and the plan grandfathers participants who worked in that classification before the effective date of the new provisions excluding that classification, and the participant terminated employment prior to the effective date of the new provisions, and the participant is rehired after the effective of the new provisions, will this participant be grandfathered or excluded. consider the impact of the change should these situations occur during the time period between when the an employee meets the eligibility requirements for a type of contribution and an employee's entry date which may be months later. if the plan uses rules of parity for eligibility, consider how these rules can complicate these situations particularly if the plan requires a one year wait to re-enter the plan. When considering situations like this, be sure to consider how the plan will apply to each of the three types of contribution sources: elective deferrals, match, and nonelective employer contributions, particularly when applying any allocation conditions for the match and NEC. The most important consideration that @Lou S. pointed out above is that the plan will need to consider employees in the coverage testing for each of the three contribution sources who met the plan's eligibility requirements but are excluded by classification.

@RatherBeGolfing is correct that if you are eligible for the penalty relief and pay the fee, you don't have to provide a reason. I appreciate the clarification.

Without researching, didn’t this get expanded during the COVID shutdown and people accepted this for multiple years?

Using the penalty relief program under Rev Proc 2015-32 is all based on eligibility and paying the user fee. As long as you are eligible and pay the fee, the reason doesn't matter.

Think about union exclusions - employees who go back and forth between union and non-union status become eligible/ineligible employees and into/out of active participation all the time. The difference here as noted above, is that you cannot statutorily exclude from coverage and non-discrimination testing if they have completed age and service eligibility requirements.

justanotheradmin, thank you for sharing your experience. For an ERISA-governed plan, whether a spouse’s consent is sufficiently witnessed to meet a plan’s provision designed to meet ERISA § 205 is governed by Federal law, not State law. But a State’s law governs whether a person is authorized to perform notarial acts, and the manner of how a notary performs a notarial act and makes a notarial certificate. Under the Treasury’s proposed interpretation, a plan could treat a witnessing as enough to meet ERISA § 205 if the witnessing follows both the State law that governs the officiating notary (which might be unrelated to any location of the participant, the consenting spouse, or the plan’s fiduciary) and the Treasury’s proposed rule. Whether a plan’s administrator should accept or refuse a remote witnessing is a serious question. To support my thinking about that question is why I’m seeking information about whether plans are using or ignoring the Treasury’s proposed interpretation. BenefitsLink neighbors, do you have other experiences or observations?

There's more to it than LTPT deferrals. There are other administratively burdensome provisions, like requiring Roth catch-up contributions and mandatory automatic enrollment. Additionally, if SECURE 2.0 goes away, 403(b) sponsors don't have to worry about any LTPT rules, not just an alteration of who counts as an LTPT employee, which impacts things like vesting. Also, I could see someone who is facing a very expensive audit cap related to a botched mandatory automatic enrollment using the threat of a lawsuit as leverage when negotiating with the IRS. A medium sized employer could find itself in a situation where the combined cost of correcting MDOs, paying lost earnings, and the fine could exceed the cost of the lawsuit. If multiple employers all facing similar situations were to band together, the cost of the lawsuit could easily be far less than the cost of complying with SECURE 2.0.

Try this old thread.

Even though Code Section 401(a) applies to several types of qualified plans, usually when someone refers to a "401(a) plan" they are talking about a governmental defined contribution plan. The 401(a) plan usually holds the governmental employer's match based on employee deferrals to a 457(b) plan, but can also hold employer non-elective contributions and employee after-tax deferrals.

IRC Section 401(a) is the section of the tax code that applies generally to all tax-qualified retirement plans, whether defined benefit pension or defined contribution plans. The answers to your questions are all "it depends" on the type of plan and its particular provisions. Then there are many other code sections that apply to certain types of plans or plan provisions. What you're asking is basically for an introduction to tax-qualified retirement plans course, which is too voluminous for this forum.

If you're using the average benefits test to pass coverage, then remember the average benefits percentage test is only part of it. You also have to pass the nondiscriminatory classification test, and part of that test is that you have to have a reasonable classification. Excluding (or including) people by name is deemed not reasonable. So if you pick and choose which of the people who would otherwise be not benefiting to now receive a benefit, I think you fail to have a reasonable classification and therefore would lose the ability to use the average benefits test. But like Bri said, check your document. If it has a 410(b) failsafe, then it probably brings people in automatically, but chances are it brings in enough people to pass the ratio percentage test. Which might be more people than you were expecting.

If you're following a document's failsafe provision, you have to choose who that indicates. Absent that and doing an -11(g), then they can choose who they'd like to provide additional benefits to. Just don't try to give it to someone who you know terminated and is also nonvested, such that they'd never see the benefit anyway.