Open Enrollment and New Match

[Guest Lawrenceg]

Employer with 401k plan fails ADP by over 4% and refunds were made.

The average deferral percentage of the NHCE's was .70%.

Currently participation requirements are age 21, 1000 hrs in 12 month period and Jan 1 and July 1 entry dates.

Employer wants to do an open enrollment May 1 to encourage additional enrollments from the NHCE's with the inducement of a 2% match.

How do you test when the eligibility changes mid stream considering that employees leaving the company before May 1 would not be eligible and that deferring participants terminating prior to May1, would not get a Match whereas those eligible after May 1 will get a Match?

[J Simmons]

Are HCEs ineligible for this special enrollment opportunity and the 2% match?

If not, you need to look at the timing under 401a4 to make sure it is not, in and of itself, discriminatory.

As for your testing, you'd figure for the year the ADR and ACR for each person, whether they are part of the special enrollment opportunity or not, just as you would if the opportunity was not provided. For those that are part of it, their 2% match would have to be included in computing their ACRs. For those that aren't, they wouldn't have any that match computed in the computation of their ACRs.