Part Time Eligible Employees

[MBCarey]

We have just taken over a new plan and were told that part time employees are eligible to make deferrals to the plan. However, when testing only the ones who actually do defer are counted for testing purposes.

Is this right?

[No Name]

Sounds like reliance on "Otherwise excludible". Would like to see how the plan's language includes them. Perhaps they're not otherwise excludible, for example based on an elapsed-time eligibility provision.

[MBCarey]

I would think that if they are considered eligible to make deferrals, then they would have to be included in the testing process. Wouldn't "otherwise excludeable" apply for eligibility and testing. Sorry if I am sounding really confused.

[Tom Poje]

sounds like plan has immediate eligibility. so far so good. but

"when testing only the ones who actually do defer are counted for testing purposes"

this would not be correct. anyone eligible to defer (regardless of whether they actually defer) are tested.

however, you are allowed to run two tests using the 'otherwise excludable' rule. if these ees never work 1000 hours, they will forever be in the group of ees otherwise excludable.

The otherwise excludable group should always pass because you either never have any hces in that test, or you move them into the other test under the special rule pertaining to hces and otherwise excludables.

[MBCarey]

Thanks Tom,

I think you are telling me thqt I would have to include everyone in the "otherwise excludible" test not just those who defer?

[Tom Poje]

correct, if by 'everyone' you mean all the part timers.

of course, no ones comp will be above 90,000, so the point becomes moot as you shouldn't have any hces in the test involving otherwise excludables.