Part-time employees

[Guest Hoosier]

How long will the otherwise excludable test work for a person? If a person is hired in 2000, won't they fall out of the otherwise excludable group in say 2001 or 2002?

Please site any references from which you obtained your answer.

Also, what about the guy who is still employed but doesn't get paid??? Weird right, but it happens. Wife of owner works, is credited with hours but does not get paid. Is this person included in the ADP/ACP test? A zero sure looks good on the HCE side, but is that the right way to approach it? It sounds to me like they are trying to get around the test.

:confused:

[Guest Ringo67]

I'm not sure about your part time employee situation, but the owner's wife in the ADP/ACP is still considered part of the owner's family so if the owner is using the max salary allowed, she would not even show up on the test because the owner's family is already represented. This is also would be subject to the owner's immediate family. This is listed under the family groups under the testing provisions.

Good Luck

[Guest Hoosier]

Ringo67 indicates that if the wife is the spouse of an owner, she would not even show up on the test, if he is at the maximum comp. However, that does not answer the question if the owner is not at maximum comp.l

Any other ideas???

[Tom Poje]

hold the horses a minute.

If a person is hired in 2000, won't they fall out of the otherwise excludable group in say 2001 or 2002?

This question implies there is immediate eligiblity, and so the person hired in 2000 is otherwise excludable. If the person always works less than 1000 hours, then they will always be otherwise excludable since they never work a year of service.

on the other hand, in the example cited, it is the owners wife. The new rules from a few years ago say age/svc doesn't matter in regards to HCEs, you can always treat them as having met the age/svc requirements, even if they never will. so you would treat the owner's wife as an HCE. (or at least that is the option, you don't have to exercise that optiion

as for the scenario of having 0 comp (yet working) there is nothing in the regs indicating how to handle this. At one of the APSA conference the IRS voiced an opinion to treat the person as ineligble. that would certainly be the conservative approach. logically I would hold that makes - the only people in your test should be those eligible to defer. with no comp I would hold that you are not eligible to defer, even though you have the right to if you had comp. my opinion only