Employer wants to establish a new 401(k) but does not necessarily want employees participating

[Lori H]

A 15 employee floor husband/wife contractor is looking to install a plan. Most of their employees are hispanic and only work when work is available. They are not necessarily terminated. He wants to set up a plan and doubts they will participate, but is there a way they can be excluded for plan purposes and still satisfy minimum coverage requirements? They were considering a Safe Harbor 401(k).

[Tom Poje]

if these people never ever ever ever work 1000 hours, then they would never meet the 1 year eligibility a plan could require. therefore they would never be included in coverage testing.

[GMK]

Most of their employees are hispanic

I'm pretty sure that this is not relevant to eligibility considerations. And it doesn't matte whether or not they might defer. For example, even part timers who happen to get to 1000 hours of service are eligible.

[Lori H]

They have at least 6 employees who worked over 1000 hours in 2009. They may have periods were they don't work but are never officially terminated ( i am not sure what counts as "officially" terminated). So if they were eligible and didn't sign up for the plan, they would still get a profit sharing. I'm thinking a New Comparability would be the best and only option for them. The document could not exclude certain employees from participating other than leased, non residents, union or temporary employees?

[rcline46]

Install a 'stacked' Safe Harbor Match 401(k). Make sure all eligible employees receive notice AND sign a zero deferral form.

[Guest Sieve]

If these people are "excluded for plan purposes", then there would be no need for a SH 401(k). But, if it is felt they will not participate, rcline's suggestion of a SH match is probably the best bet.

[Lori H]

Install a 'stacked' Safe Harbor Match 401(k). Make sure all eligible employees receive notice AND sign a zero deferral form.

By stacked, do you mean "enhanced"?

[rcline46]

If you want to get to the $49,000 limit, you may not get there with an enhanced match. You would need two Safe Harbor match formulas, therefore 'stacked'.