Last Day Rule Question???

[Guest KD40]

I have a plan who gives there employees a match once a quarter, and you must be employed on the last day of each quarter to get the contribution. Normally, when a last day rule exists, you can exclude that group of people who termed prior to the end of the plan year, from the ACP test (if they match once a year).

Can I exclude those people who termed in that first quarter of the plan year from the ACP testing if this were the case?

[Mike Preston]

If they deferred and didn't receive a match, they don't count in the ACP test. It is a much more interesting question as to whether the mere existence of the quarterly match eliminates the ability to treat those who terminate with less than 500 hours as excludable when doing the 410(B) test with respect to the match. I think it depends on your interpretation of what "minium period of service" means in the context of the regulation in question. If it just means a specific number of hours, then I think you lose the ability to exclude those who terminate with less than 500 hours from the 410(B) test, which may just be the conservative position. However, if the individual terminating is an HCE it might be the opposite of the conservative position. I'd be in favor of asking Wick his opinion on this at the first opportunity.

[Guest KD40]

Thanks for the response. Do you have a reference for me to refer to in order to clarify the last day on those who deferred and did not receive the match because they termed in the 1st quarter of the year?

We are getting second opinions from other higher ups in the dept and I wanted to take them some documentation.

Thanks.

[Mike Preston]

1.401(m)-1(f)(4) makes it pretty clear.