Exclude HCE?

[Dougsbpc]

Can a non-key HCE be prospectively excluded from a top heavy db plan when he has already accrued benefits under the plan? I dont think so.

I think it is a different story if he was excluded from participation right from the effective date (i.e. he never accrued a benefit under the plan). Then as long as the plan passes 401(a)(4) they are OK.

Anyone disagree with this?

Thanks

[Lame Duck]

I've seen a number of plans where the definition of eligible employee specifically excludes non-owner HCEs. It helps meet the 410(b)(1)(B) tests and I don't see it violating 401(a((4), which prohibits discrimination in favor of HCEs, not against them. Depending on the age of the HCE(s) excluded, you might have an ADEA problem, though.

[WDIK]

I've seen a number of plans where the definition of eligible employee specifically excludes non-owner HCEs. It helps meet the 410(b)(1)(B) tests and I don't see it violating 401(a((4), which prohibits discrimination in favor of HCEs, not against them. Depending on the age of the HCE(s) excluded, you might have an ADEA problem, though.

Yes, but doesn't this apply before any benefits have accrued?

[Lame Duck]

Yes, it does. I was responding to the second part of the post only. As for the first part of the post, our basic plan document states that "Participation of an Eligible Employee who cease to be an Eligible Employee shall cease immediately." As far as I know, this type of language appears in most plan documents. Can you have a plan that covers all employees and amend it to cover only salaried employees? If you can, the same rationale should apply to amending a plan to create a new class of excludable employee - non-key HCEs.