Coverage for small plan

[Gary]

An owner of a company has two common law employees. Neither employee met the 21 & 1 requirement to enter the plan on 1/1/08.

The wife was hired 1/1/08.

Can the DB plan include the wife for 2008 and exclude the employees? That is, liberal entry for wife, but still exclude employees due to the statutory requirement.

Thanks.

[mwyatt]

no.

[david rigby]

For 412 purposes, we are beyond the 2-1/2 month time period for recognizing amendments, anyway (assuming a calendar year plan).

[Gary]

Ok, then let's say it is a 1/1/09 plan year.

The previous response was "no". While it may not seem reasonable, does anyone know of a specific regulation section that would not allow this?

It would seem that the wife would not even be part of the non excludable group of employees; where the non excludables appear to only include 1 employee (the owner).

Is it because the excludable employees (alone) have to pass coverage rules too?

Thanks.

[SoCalActuary]

Ok, then let's say it is a 1/1/09 plan year.

The previous response was "no". While it may not seem reasonable, does anyone know of a specific regulation section that would not allow this?

It would seem that the wife would not even be part of the non excludable group of employees; where the non excludables appear to only include 1 employee (the owner).

Is it because the excludable employees (alone) have to pass coverage rules too?

Thanks.

Yes to your last question. However, you could also have a comparable DC plan covering one of the NHCEs, assuming you get proper results from the Average Benefits Percentage Test.

[rcline46]

The answer is no because any amendment must be non-discriminatory. And the amendment to let the wife in (an HCE) is clearly discriminatory. Search under amendment and discrimination.