Excluding certain employees from participating

[Guest Benefitsrock]

A temporary agency (provides individuals for office administrative positions, such as if a secretary is out) wants to set up a 401k but wants to exclude the temps to the extent legally possible. Aside from requiring 1000 hours, is there any other way to exclude individuals? Thanks in advance.

[jpod]

You can exclude anybody you want to exclude as long as (a) the nature of the exclusion does not have the effect of establishing an eligibility requirement of more than "one year of service" (as defined in the IRC); for example, excluding "part time employees;" and (b) the exclusion does not result in discrimination in violation of Federal or State civil rights laws.

The IRS has published a good deal of guidance on (a).

Of course, once you've implemented all legal exclusions, you still must pass coverage.