Includable For Coverage, Excludable For Participation?

[Guest merlin]

A db plan participant terminated 4/26/04 (calendar year plan) with 600 HOS. The value of her vested benefit was $4685. I think she's not excludable for 410b because of her hours, but she's excludable for 401a26 because her vested benefit was < than $5000. Is that correct?

[Belgarath]

I think you are correct on the 410(b).

I also think you are right on the 401(a)(26). It appears to me that 1.401(a)(26)-6©(4) agrees with what you said.

[AndyH]

Are you sure that isn't just within the context of prior benefit structures? I have not had time to analyze it, but if that was snuck into one of the recent laws I missed it.

[Blinky the 3-eyed Fish]

It is under the prior benefits structure test and its optional to exlude them or not. Now the question would be why someone would choose to exclude someone with benefit if they are trying to pass (a)(26)? I suppose if the benefits accrued by this person were not considered "meaningful" then excluding them would help the test.

Anyway, you appear to be testing current accruals, so no she is not excludable.

[Belgarath]

No, I'm not sure of anything at all! Apparently Big Papi's second home run bounced off my skull.

But I think you are right, and I was confused. So would you test former employees only if the plan is frozen? I mean, for a normal active plan, then you'd test based upon current accruals, where this person wouldn't be excluded - is that right?

[AndyH]

That would be my take.