Immediate entry if hired by XX Date..

[jkharvey]

Brand new plan provides for immediate entry if employed by 8/1/2005. Only the two owners meet this requirement. The other participants were hired one month later and in this first year would not be eligible. Other than this "looks" funny, is this immediate entry a BRF that would fail coverage?

[Tom Poje]

this could be a big 'it depends'.

its not really a BRF issue, but could be a coverage issue.

years ago at one of the conferences, someone asked this question about the same thing in regards to a Standardized Plan, and the IRS response was something to the effect that a Standardized document can't fail coverage, so you must be ok.

I do not know if the same rule wiuld hold true if the plan is not on a standardized document. and you did not indicate if this was a totaly new company, or whether the HCEs have been around awhile. if the HCEs have been there over a year, then you could always test using the otherwise excludable option and you would pass.

[PLAN MAN]

This is definitely a coverage issue. Under the regs. 1.410(b)-6(b)(2), the exclusion for employees who fail to satisfy the plan's service requirements is applied to the lowest requirements applicable to any employee benefiting under the plan. As I understand it, if the owners were not required to satisfy any service requirements, then the other employees are tested as if they are not required to satisfy any service requirements and they would be treated as eligible but not benefiting under the coverage testing.

From the regs: "those employees who fail to satisfy all of the different sets of age and service conditions are excludable employees with respect to the plan"