Exclusion of employees

[Guest Laura Millwood]

Do you take a plan out of prototype status if you exclude a class of employees that you define under "other"? Client wants to exclude co-op workers who are high school and college students. Would this be an allowable excluded class? Client wants immediate participation for all eligible, but would like to exclude this group. Setting the age requirement at 21 will not keep all of these people out. Any suggestions?

[LCARUSI]

I'm sure you can't do this under a prototype, but I think you could do it under a custom plan:

1) Eligibility is immediate for anyone working at a rate expected to exceed 1,000 hours per year,

2) Eligibility is 1 year (1,000 hours) for anyone else. Thus, those employees who are expected to work less that 1,000 hours will not enter the plan until they exceed 1,000 hours for one year. (The employees who tip over 1,000 hours and enter the plan will count against you in the 410(B) test in the year prior to entry, so it might be a problem if you have too many of them. It desn't sound likely.)

[KIP KRAUS]

Most prototype plans I've seen allow an employer to define what ever classes of employees they wish to include or exclude as long as it is not descriminatory in nature. The main consideration for you, as I see it is, whether or not excluding the co-ops will adversley effect your descriminatory testing.

By the way, it is not uncommon to exclude co-ops

My last company did, but we did not have a prototype plan.

Your other alternative, as aludeed to by LCARUSI, is to limit co-ops to less than 1,000 hours during a calendar year and they wouldn't meet the participation requirements. Which, incidently, as I recall, our co-ops employment periods typically never exceded 1,000 as a matter of course. If you are using co-ops as more of a full-time staff alternative, you should exclude them from eligibility. Hope this helps.