new plan, coverage and non discrimination

[Gary]

This topic is strictly to determine which employees if any are excludable for testing (coverage and non discrimination)

A doctor starts his business 6/1/2011.

Calendar plan and fiscal year.

On december 30 2011 he adopts a pension plan effective 6/1/2011.

The plan provides 21&1 elig, but those employed on 6/1/2011 enter plan on that date.

The doctor and 4 employees have hire dates of 6/1/2011.

1000 hours is required for an accrual.

However, since it is a 7 month plan year that amount is reduced to 583 for 2011 (just thought of this now).

2 of the four employees terminated in 2011 after completing 583 hours (less than 1000).

So, in effect each employee would have completed a plan year of service for accrual purposes.

They terminated prior to the adoption date of plan of 12/30/2011.

So must the terminated employees be counted for testing?

If they never become participants, then clearly it would be "no".

However, since they were employed at 6/1/2011 and if they were considered participants then it seems they should be included in the testing counts.

Re: otherwise excludable employees:

Can we deem the employees with 1000 hours in 2011 as non excludable (even though they completed 1000 hours in only 7 months) and the terminated employees who worked less than 1000 hours as otherwise excludable?

(Also just thought of this) And lastly, if we give the owner and all four employees the same accrual rate for 2011, then there is no issue re: coverage and non discrimination and then the terminated employees would have non vested terminations and $0 distributions.

Ideally there would be a cite that provides that if an preson is terminated at time of adoption they do not have to be included. I'm thinking that with less than 5 years past service provided they could be excluded.

Thanks