Cross Testing With Terminated Participants

[Guest HoopsForBM]

When you are running cross-testing and your plan document says you have to be employed on the last day of the plan year to get a Profit Sharing contribution, do you include participants who deferred during the year and got a Safe Harbor Match in all of the testing or can you exclude them on testing all together? My initial thought is that if they are not eligible for a Profit Sharing contribution, then they should not be on any of the testing since they are not benefiting for that source of money even though they deferred and got a Safe Harbor Match.

[rcline46]

First, are you discussing the 401(a)(4) testing, 410(b) testing, ABPT or ABP? The answer varies based on exactly which test your are doing.

Then we go to whether you are using Statutory Exclusions.

We work in a very detailed, fact specific world - with apologies the 'The Prisoner' - we need information.

[Tom Poje]

this boils down to what test you are talking about.

could the person defer? YES (doesn't matter whether he does or not)

therefore, for coverage he is considered benefit, and is always included in the avergae benefits percentage test. always. again, doesn't matter whether he deferred or not.

for 'rate group' testing [nondiscrimination classification test] - the only time you can exclude anyone who has been a participant is if they terminate and work less than 500 hours and did not receive a nonelective contribution.(And this is optional exclusion, you can always include them.)

so, the person will show up on one test and maybe not the other.