exclusions from SIMPLE-IRA eligibility

[Guest bmurphy]

Outside of the standard exclusions available (covered by collective bargaining agreement, nonresident aliens) does an employer have any other means to exclude employees who would otherwise be eligible to participate in the plan?

[Appleby]

In addition to those you mentioned, i.e., employees covered under a collective bargaining agreement and non-resident aliens with no income from the employer, employees who do not meet the compensation requirement are excludable

[Guest bmurphy]

Thanks Appleby

This employer has no past service requirements, only that employees are "reasonably expected" to earn 5k in the current year. There are 3 new people who are compensated solely on commissions. Since they are all doing the same job (loan originators for a mortgage company) the employer couldn't say "these 2 are expected to earn 5k but the other isn't", correct? I get the feeling the employer would like to offer the Simple to some but not all & I don't believe they can do this.

[Appleby]

IMO, only if there is reasonable justification to exclude these individuals. Is the employer able to clearly demonstrate why these two employees were not reasonably expected to earn $5,000 for the year while the other employee was expected to earn at least $5,000? ...if the three individuals has the same job function and work the same hours, it would not seem reasonable…however, if one works full-time and the other two works for a limited number of hours, which (based on trends) results in compensation less than $5,000, it could be justifiable to exclude the two part-timers… even if these individuals compensation does exceed $5,000 by year-end, as it is not what is actually earned, but what was expected to be earned. Example: an individual who was employed on a part-time basis earning say $250 per month was excluded from the plan, because he did not meet the current year compensation requirement. A few full-time employees resigned and the individual’s status was changed to full time later in the year to fill one of the openings, resulting in this individual earning compensation of $5,000 or more…since, it could be argued that the change in employment status was unanticipated and it was therefore reasonably expected that this individual would not earn $5,000 in the year, his exclusion is permissible.

Hope this helps.