Who is eligible??

[smm]

401(k) plans of employer exclude a class of employees who happen to be HCE. Is this class considered "eligible" for purposes of ADP test and hence, given a rate of 0? Would result be different if this class of employees are eligible to participate in another plan of the employer that does not have a CODA feature?

[Guest JimD]

If the 401(k) portion passes coverage they would not be included in the ADP test. I do not believe their eligiblity in the other non-CODA plan changes this.

[smm]

What if the class is excluded because they all max out under 415©(1) or 415(e) under the other plan. Does that make a difference. (See the regulations 1.401(k)-1(g)(4) - last line.) They could be included in the 401(k) plan as being eligible but defer zero because they are maxing out under another plan. Does this technicality make a difference?

[Blinky the 3-eyed Fish]

If the class is not excluded, but just can't defer because of 415, then they would count as zeroes in the test rather than not being in the test.

I suspect that is what you were hoping for.

[smm]

You are smart and that is the result that I would like to achieve. The only question of mine is whether that result can be achieved if they are excluded from the definition of employee in the 401(k) plan. If the answer to that is no, could you permissively aggregate the plan they are in (under which they max out) with the 401(k) plan in order to achieve the desired result?

[Blinky the 3-eyed Fish]

You can permissively aggregate the plans if they have the same plan year. But one of your previous questions asked about another plan without a CODA.

Thus, permissively aggregating a 401(k) plan with a plan without a CODA arrangement is not going to change your ADP test in this case. All permissive aggregation is going to do is effectively treat the two plans as one for nondiscrimination and coverage. The participants in the non-CODA plan would still not be able to benefit in the 401(k) feature and would thus not be in the ADP test.