401a testing question

[Guest Susan M.]

Hello,

I am completing a 401A comparibilty test.

A key employee has been eligible in the past and now for 2011 works under 500 hours.

the key employee still works for the company but will not receive a employer contribution because the hour requirment is 1,000 hours.

Can I include her on the 401A test or do I not include her because she did work under 500 hours.

Thank you

[Tom Poje]

2 points

1. you can only exclude terminees who work less than 500 and receive nothing, so in this case that rule would not apply.

2. if the person had actually terminated, it is an option to include or exclude, as long as you teat all people the same.

[Guest Susan M.]

Hi Tom

I agree with you but this person is still active and has worked under 500 hours

it is my assumption I have to test this participant in the 401A test because they are still employed.

if they were terminated then yes, I would exclude them because they are under 500 hours.

Thank you

sue

[Jim Chad]

Being picky, I know. But just want to remind you to think of HCE not Key.

And yes, I think you have it right.

[Tom Poje]

agree, person is still included because they are not terminated.

next year, well, that depends.

if its a non-401k plan, it is possible the plan uses the one -year break in svc rule.

and therefore, despite the fact he didn't terminate, he did have a break in svc, and he would have to re-establish eligibility by working 1000 hours, otherwise he is not an active participant.