What is the biggest reason for not having a Salaried-Only 401(k) plan?

[Guest perplexed]

What are the thoughts out there against excluding hourlies from participating in a 401(k) and limiting participation to salaried only? I'm trying to make a case for opening eligibility up, and I'm being met with arguments. We have a db plan that includes everyone, but our 401(k) is very restricted (only salaried). I've tried the argument that this will look like a discriminatory HCE set-up and didn't get very far.

This is a factory situation, but low turnover of hourly employees.

[Tom Poje]

it quite well could be discriminatory.

for example

Hourly = 9 NHCEs

Salaried = 3 NHCEs, 2 HCEs

coverage would be

3 NHCEs / 12 total NHCE = 25.00%

2 HCEs / 2 total HCEs = 100%

Ratio % = 25% Not even close to 70%

might get lucky and pass avg ben test, but doubtful

[JanetM]

Perplexed, if this plan has been around for a few years these hourly folks must be union. Union are disaggregated for testing. There is not reason to exclude any hourly or union folks from the plan.

Why not try the asset angle. If you allow these hourly folks to participate the assets will increase faster and the fees will go down in the future.