Employee Classification and Crediting Prior Service

[Guest caddieadmin]

I'm trying to determine some options I might have in a couple of plan design areas, and I've had a little trouble finding the answers in my attempts at searching through the IRC.

If I want to classify a few levels of employees, are there other ways to segregate groups of employees other than salaried employees vs hourly? And are there any possible effects/restrictions I can impose upon matching contribution %'s via these classifications? For example, is it possible for managers to receive a higher MC % relative to hourly employees MC %? (bear in mind, nobody involved with the 401k, not even the managers, would be considered a "HCE")

I was also trying to look into ways of crediting prior service (service recorded before the effective date). Are there a few ways to do this? Or do you simply have the ability to credit up to 5 years of prior service, period.

I don't want to take up too much of your time, so if you can even direct me to the right sections of the IRC that would be a great help. Thanks so much.

[J Simmons]

I don't think you'll find a Code reference that will specify that you can do this--but I don't think you will find one that prohibits it either.

If your discrimination does not favor HCEs vis-a-vis non-HCEs, it will not violate nondiscrimination or minimum coverage requirements.

You've said that none of the managers that would receive the higher MC% are HCEs. It's not prohibited.

As for your prior years of service crediting, you haven't indicated that doing so would or would not favor HCEs vis-a-vis non-HCEs. If it doesn't, then that too would not be prohibited.

You won't qualify for safe harbors nor be able to use a mass submitter or prototype documentation, but with an individually designed plan, you should nonetheless be able to demonstrate nondiscrimination and minimum coverage.