Coverage

[austin3515]

Doing coverage calculation for a 401(k) Plan with a match.

Initial eligibility is 12 months, regardless of hours (i.e. elapsed time). After such period you are eligible to make deferrals as of the first to occur of 7/1 or 1/1.

For the match, as long as you're eligible to make deferrals you are treated as benefitting under the match.

But, in order to receive the match, the part must work >1,000 hours in the Plan Year. My questions is this, if someone did not receive for two reasons, 1) They did not defer, 2) they did not work the 1,000 hours, are they then treated as not benefitting?

Thanks

[Tom Poje]

Look at it from this point of view:

Plan matches 100% of deferrals.

Suppose the ee deferred. or worded differently, the ee did defer, he simply deferred at 0.

If he worked 1000 hours, his match, 100% of deferrals is 0, so he benefitted.

If he worked less than 1000 hours then he could not have gotten the match(even if he had actually deferred something), so he would be included and not benefitting for coverage.

If he terminated with less than 500 hours then he could be excluded from coverage. This is an option.

If there is no way he could get the match then he would not be in the ACP test. The exception would be if the plan allowed after tax contributions. Then he would be in the ACP test and he would be included and benefitting for coverage because he could have made an after tax contribution.

[austin3515]

Thanks Tom -

So nonexcludable, nonbenefitting for coverage and

Not included whatsoever in ACP, right?

Thanks a lot!

[R. Butler]

Not includible in the ACP.

Terminated with less than 500 excludable from coverage test.

Less than 1,000, but more than 500 or still employed regardless of hours, nonexcludable, nonbenefitting.

[austin3515]

Thanks!