employee elects NOT to participate

[cpc0506]

I have a client who provided information about the plan to two employees who have met the eligibility requirements to enter the plan. Both reviewed the plan and both declined participation.

Can these employees be removed from the plan for testing purposes? It is currently a safe harbor match plan and top heavy (satisified by SHM) but what if the employer chooses to make a profit sharing contribution? Will these employees be required to get a contribution?

[rcline46]

It seems to me they elected to defer -0- to the plan, they did waive participation.

[QNPG]

I have a client who provided information about the plan to two employees who have met the eligibility requirements to enter the plan. Both reviewed the plan and both declined participation.

Can these employees be removed from the plan for testing purposes? It is currently a safe harbor match plan and top heavy (satisified by SHM) but what if the employer chooses to make a profit sharing contribution? Will these employees be required to get a contribution?

Unfortunately, they're taken into consideration for 410(b) testing if they're a nonexcludable employee even if they don't actually defer by their own choice. Also, if they are an eligible employee - meaning not excluded by name (70% test) or class, and they satisfy the allocation requirement (if there is one), they're eligible to receive the profit sharing contribution.

My two cents...

[masteff]

It seems to me they elected to defer -0- to the plan, they did waive participation.

I think a "not" was left out (ie, "did not waive").

An irrevocable election to not participate, if I understand it correctly, must be made on or before the date the participant gains eligibility and the plan document must provide that it can be done. Lacking that, then as rcline notes, they're eligible but not deferring and should therefore get profit share.