separate testing of excludable employees

[Guest mackenzie]

Our 401(k) plan allows all employees on date of hire to participate. In order to minimize the refunds under the plan after running the ADP test, we would like to take advantage of the regulation that permits the plan to be treated as two separate plans---one covering all employees who meet the minimum age and service requirements and one covering employees who do not. I am unclear on how this works. The employees who do not have a year of service---how do you identify? Our plan has an elapsed time provision. So does this mean all employees who have not worked for us for a year? Our recordkeeper says that we can ignore employees who have not worked for us for 18 months. Anyone with experience in this area?

[Tom Poje]

the regs (1.410(B)-6) basically say you can test seperately those who could have been excluded if the plan had the maximum eligibility requirements.

Elapsed time really shouldn't have any bearing.

you have to be careful about using 18 month logic.

Consider a calendar year plan, ee hired 12/1/2001. EE quits 2/1/2003. He has worked less than 18 months, but maximum exclusion includes 1st day of the plan year, so he would have entered 1/1/03.

You would also exclude those ees who never worked 1000 hrs. Under elapsed time ee could be in the plan, yet never have worked 1000 hours.