Plan document matter

[Gary]

Say an owner of a company with 5 NHCEs implements a safe harbor 401k plan.

All employees are non excludables for discrimination testing.

The owner wants to exclude employee 5.

Can the plan document simply provide in its terms that employee 5 is excluded? This as opposed to trying to create a job classification like all engineers are excluded from the plan.

thanks.

[12AX7]

Would it be possible to get an irrevocable waiver before this employee becomes eligible? It appears on the surface this employee would be agreeable to not have coverage in the plan, but that would knock him out from all future plans of this employer as well.

I've seen plans that have employees excluded by name (with a a favorable DL), but I never felt really comfortable with that arrangement even though the non-discriminatory classification test was not an issue. I've never had a client that could not come up with a class that I could not exclude, but sometimes that takes a little more thinking on the client's part to figure out exactly what it is. Never had a problem come IRS audit time (yet).

[Bird]

I don't have a problem with excluding by name, and would greatly prefer that to an irrevocable waiver.

[DMcGovern]

There may be one problem with specifically naming the individual as excluded in the document. When running the 410(b) test, I believe you would not be able to use the average benefits test. Naming the individual would not pass the reasonable business classification test as part of the ABPT.