Excluding Commissioned Employee

[Guest BuffaloT]

I have a client who is looking at establishing a safe harbor 401k. It seems that under the standardized plans all compensation is included, but that under a non-standardized plan he can exclude commissioned employees from participating regardless if they are w-2? Will the IRS give a determination letter accepting this type of plan as qualified status? Can anyone point me in the right direction?

[WDIK]

Many non-standardized prototype documents have received approval letters from the IRS.

[Leopurrd]

You would want to use a non-standardized document. Standardized documents do not let you exclude employees by class.

I don't think that there is anything wrong with excluding commissioned employees, you only need to be sure that upon audit the IRS can clearly classify a "commissioned" employee.

Besides excluding the employee, you need to pass all non-discrimination testing. (to clarify, if/once the excluded employee meets all plan requirements, they would count against your bottom line for coverage. you have to have at least a 70% ratio to pass. Of course, you can also use average benefits, but this is a quick example).

Hope this helps,

Vicki