Exclusions from Profit Sharing Calculation

[Guest Barge Girl]

Is it possible to exclude one group from the profit sharing portion of a plan who are otherwise eligible to make elective deferrals?

Specifically, I have a client with non-resident aliens working in the United States. They are here from the parent company in Japan, and stay for a period of 2 to 4 years. The plan sponsor would like to be able to allow them to make elective deferrals but not receive a profit sharing contribution because that portion of their retirement benefits are actually paid by the parent company. Is this possible?

[Tom Poje]

yes, it is possible. You would still have to pass coverage - I am assuming these are non-resident aliens with US income so are not excludable for testing purposes.

[Guest Barge Girl]

Tom,

You are correct in that they have US income. There is only one Japanese employee here now. We actually think this employee (who is highly compensated) will help the ADP/ACP test because we don't think he'll defer even when given the option. I will look at their coverage, but I don't think that will be a problem.

Thanks!

[Tom Poje]

must be nice, having an HCE getting excludable. that helps all testing.

quite often you see this happen with associate attorney and non-associate attorneys being excluded.

I will backtrack on one thing. If the plan is top heavy, since the ee is a participant he would have to receive the top heavy minimum (even if excluded from the profit sharing). unless he was 'key' and keys are excluded from minimums.

[Guest Barge Girl]

Thanks for the top-heavy reminder. I am hoping that won't be a problem since not only does the company offer an annual profit sharing contribution, they match 25 cents on the dollar up to 24% of compensation. Needless to say, participation is excellent at all levels!