Reasonable Classification and 410(b)

[AndyH]

If a qualified retirement plan that covers all employees is amended to exclude employees hired after a certain date (e.g. May 1, 2002), will the plan fail coverage when the 70% ratio percentage test is no longer be met, or is the average benefits percentage test available for coverage testing?

Opinions please.

[Blinky the 3-eyed Fish]

I think it's a reasonable classification and would certainly say you can use the average benefits test.

[Mike Preston]

In general, empoyment date classifications are reasonable. However, there is always the chance that the coverage group before is so heavily weighted to HCE's and the group after is void of same that the IRS might take exception. Best to sumit.

[AndyH]

Thank you both for your comments.