Eligibility Test for POP

[Guest spongebob]

:confused: How is the eligibility test for a POP only performed and who counts in the test when not all employees may be eligible for Group Health benefits (the only benefit offered under the POP)? For example, an employer (an LLC taxed as a partnership) with 50 employees wishes to establish a POP plan. The only benefit available is Group Health. Eligibility for the Group Health plan is only available for employees who normally work more than 30 hours per week, and entry is then 90 days after hire date. LLC Members are not eligible becauase they are considered self-employed.

If the POP plan's eligiblity is the same as the Group Health benefits (i.e. must be scheduled to work at least 30 hours/week, then entry 90 days after hire date) how are employees who normally work less than 30 hours/week treated in the eligiblity test? Do we treat LLC members as eligible or as excluded employees for this test?

The root of my confusion is this...do we only count employees in the eligiblity test who are actually eligible for the health benefits (and therefore can run premuims through on a pre-tax basis) or do we count all employees for the test, even those who normally work less than 30 hours/week? If employees will never be eligible for the Group Health plan because they never work more than 30 hours/week can we treat them as excludable employees for purposes of the eligiblity test? And finally, how does the 3-year rule for participation affect all of this?

[papogi]

(edited)

The eligibility test (Fair Cross Section test) for the POP should look at all non-excludable employees. Part timers are not considered excludable for this test (in some cases, part timers with less than 1000 hours worked in a year can be excluded). Although employees who work less than 30 hours are not eligible in your plan, they are non-excludable, so discrimination testing (specifically, Fair Cross Section) should take them into consideration.

The three year rule also only applies to eligible employees. An employee could work less than 30 hours per week for a lifetime and still never be eligible for your POP. Once that employee goes over 30 hours per week, however, you must let them on the POP without satisfying the 90 day wait. Or, you can specify in the plan doc that they become effective on the first day of the following 125 plan year.