Who is included in Nondiscriminatory Classification test?

[Guest Dave Dougherty]

Assume the following facts:

Plan has 401(k) and non-elective profit sharing components.

401(k) eligibility is immediate, PS eligibility is 2YOS/21.

PS allocation has dispartate rates and is cross-tested.

Plan is top-heavy.

All non-key employees not terminated during year get TH minimum contribution. NHE's who get TH contribution must also get gateway, even if they are not eligible for the PS portion of the plan due to service. Tripodi says I can apply disaggregation of otherwise excludables to avoid having to give gateway to those who get TH min but are below statutory eligibility. Assume I elect to apply otherwise excludable such that I have 3 groups:

1) Those with 2 YOS who get a contribution if they meet contribution eligibility for the year.

2) Those between 1 and 2 YOS, may get TH minimum, and if so, get bumped up to 5% gateway.

3) Those less than 1/21 who get TH min if employed at year end.

My question is: In performing the nondiscr classification portion of the cross-test, do I have to bring group 2 people into the test? (I know that for purposes of the ABR test I have to include group 2 and their contributions). Thanks.

[Blinky the 3-eyed Fish]

Long question, short answer: yes.