Eligibility - Salary to Hourly Mid-Year

[401king]

Plan excludes hourly employees.

Participant will go from being a salaried employee to an hourly participant in October.

I think the assumption is correct that he will no longer be able to participate in the plan as he is in an excludable class.

For testing purposes/matching, what compensation should be used? Full year comp? Or comp up to the date he becomes hourly?

Any input is appreciated.

[Jim Chad]

Of course, first thing is to look at the document.

And that probably is clear s mud or you would not be on this board now.

Here is my first thought FWIW, if the doc says to use comp only while eleigible, I would not use whole years comp.

Otherwise, I would use whole years comp.

I'm interested to hear what others would do.

[MWeddell]

I agree with the above response.

Sometimes the document also will have a provision that says one can use any other testing rules permitted by the 401(k) & 401(m) regulations, in which case you can decide on the fly whether to use the whole plan year's compensation or just compensation during the portion of the plan year that participants are eligible. Often times, you'll only have data for the whole plan year though.

[BG5150]

Sometimes the document also will have a provision that says one can use any other testing rules permitted by the 401(k) & 401(m) regulations, in which case you can decide on the fly whether to use the whole plan year's compensation or just compensation during the portion of the plan year that participants are eligible. Often times, you'll only have data for the whole plan year though.

ADP/ACP testing is one thing, but determining a profit sharing, forfeiture or safe harbor allocation is another matter; you can't pick and choose which comp you want to use.

[MWeddell]

ADP/ACP testing is one thing, but determining a profit sharing, forfeiture or safe harbor allocation is another matter; you can't pick and choose which comp you want to use.

Agreed. The plan has to state over which time period compensation is being measured for contribution allocation purposes.