Just received note from our TPA that our profit share test did not pass. We started 2015 with owner and 5 employees. During the year we terminated one, one took early retirement, and one left for another job. None of the 3 were employed on the last day or received 1000 hour requirement so they are not eligible for profit share. (We have a tiered structure for profit share.) The TPA says that we have 3 employees who are otherwise eligible for the "plan", so they come onto the discrimination test as $0. This is what made the test fail. Is this correct? I can't see how the 3 terminated employees can be used in testing profit share if they are not eligible for profit share. Thank you in advance for your response.
