Excluded Employers of a 401(k) Plan

[Guest RS Vatalaro]

Facts: Company X sponsors a 401(k) plan. Company X is a bro-sis group with Company Y and Company Z. Company Y is Candadian and all employees are Canadian citizens. Company Z is U.S. based as is Company X. Neither Company Y nor Company Z have any HCE's. All HCE's are employed by Company X.

Discussion: I believe Company Y can be ignored so long as the plan document excludes non-resident aliens as a statutory exemption from participation.

Questions:

1) The plan is in the process of being restated since it is switching investment carriers (standardized prototype of the investment carrier is being used). The former plan document did not exclude non-resident aliens. Is it OK to exclude them in the new document, or is that considered an illegal cut-back of benefits?

2) The standardized prototypes I have seen allow for eligibility exclusions of non-resident aliens and employees subject to collective bargaining. If it is the intent of the employer to exclude Company Z employees from participation, can this be done in a prototype environment? Assume the plan passes 410(B) by excluding Company Z employees.

3) The former plan document did not state an exclusion of employees in Company's Y or Z. Since we have a controlled group, employees of Y and Z were eligible to participate assuming they met age and service. However, the employer did not make the plan known or available to employees of Company's Y and Z. Does this mean that a QNEC to those employees is required, = to ADP of NCHE's for the years in question?

4) If I'm right about 3), which of the IRS correction programs does this issue fall under, or is self-correction an option?

Thank you for any help, I greatly appreciate it!