Certain Terminated Employee

[fiona1]

Here's a good one...

1/1/08 to 12/31/08 plan year. Match has an active at year-end requirement.

John has a termination date of 1/5/08 - however he earns no compensation in 2008. He has no deferrals and no match for 2008.

Can he be excluded from the Ratio Percentage test as a Certain Terminated Employee? One of the requirements of a CTE is that the employee fails to receive the match "solely because of the failure to satisfy the last day requirement."

Well, the reason he didn't get a match can be attributed to the fact that he didn't earn compensation. Without compensation you aren't able to defer - and thus can't get a match.

Or is this a bit nit-picky?

Thoughts?

[J Simmons]

I would interpret Treas Reg § 1.410(b)-6(f)(1) that John is a Certain Terminating Employee despite having no 2008 compensation, another reason he received no match. The requirement of Treas Reg § 1.410(b)-6(f)(1)(iv) makes more sense if the 'solely' aspect is interpreted to mean that the year end employment requirement alone would cause the employee not to receive the contribution, not that it must be the only such reason.