Participation Waivers

[Guest PEM]

Are there any legal issues caused when an employer plan sponsor gives an employee the option of either waiving participation in the plan or not being allowed to work additional hours for the current plan year in order to keep the employee below the 1000 hours requirement for a contribution allocation? The employer has limited funds available for contributions and does not want to contribute for new employees. Note that the Plan Document does allow waivers of participation.

[QDROphile]

What do you think of Treas. Reg. 1.401(k)-1(e)(6)?

[Kirk Maldonado]

Or ERISA section 510?

[Lori Friedman]

You mention that the employer would prefer to keep newly-eligible employees from enrolling in the plan. Is this employer attempting to coerce or otherwise influence people to waive participation? As the kids say, "don't go there".

[RCK]

This is the kind of scheme that gives the rest of us a bad name, and saddles us with all the code and regulations.

[Guest Pensions in Paradise]

I agree with all of the prior posts, in that you cannot coerce employees to not participate. However, there is nothing wrong with amending the plan prospectively to exclude employees who are not yet eligible. But the plan will have to pass coverage.

[Blinky the 3-eyed Fish]

And the plan would have to pass coverage even with the waivers, so there is no difference than just amending the plan as PIP describes.

[Kirk Maldonado]

I agree completely with the sentiments of RCK.

When Congress learns about an abuse, they always enact overbroad legislation (which will apply to some non-abusive situations), to make sure that no abuses slip through the cracks. Thus, everybody (not just the bad guys) have to live with the new restrictions that get enacted because of the bad characters. Those guys (and gals) make life miserable for the rest of us.