Otherwise Excludable Employees and 401(a)(26)

[stbennet]

DB plan with no hours requirement for entry but 1000 requirement for accrual.

So, those employees that have never had 1000 hours are still in testing population but aren't benefitting. I'm not passing a26.

Can I apply a26 to statutory group and OEE group separately? Since nobody in the OEE group is benefitting in the DB, would it matter?

Code says:

(B) The plan under which the otherwise excludable employees benefit satisfies section 401(a)(26), both by reference only to otherwise excludable employees and by reference only to employees who are not otherwise excludable.

I have no clue what that means.

Thanks.

[Bri]

I haven't ever gotten a full explanation for this topic.  

1.401(a)(26)-1 says:

Exceptions to section 401(a)(26) —

(1) Plans that do not benefit any highly compensated employees. A plan, other than a frozen defined benefit plan as defined in § 1.401(a)(26)–2(b), satisfies section 401(a)(26) for a plan year if the plan is not a top-heavy plan under section 416 and the plan meets the following requirements:

(i) The plan benefits no highly compensated employee or highly compensated former employee of the employer; and

(ii) The plan is not aggregated with any other plan of the employer to enable the other plan to satisfy section 401(a)(4) or 410(b). The plan may, however, be aggregated with the employer's other plans for purposes of the average benefit percentage test in section 410(b)(2)(A)(ii).

 

In my situation, let's say I have 19 employees but 2 of them are otherwise excludable NHCEs.  I've got 7 out of 17 nonexcludables (41%) but 0 out of 2 excludables benefiting.  The problem is that my plan's top heavy.  

(Leading me to think I have to look at the population of a whole, and 7/19 is 37%.)

 

And the follow up then becomes, does SECURE 2.0's provision to allow bifurcating for top heavy starting in 2024, give plans a loophole not previously available?  Clearly the excludable "plan" for testing purposes would NOT be top heavy since it's just new folks with no Keys nor HCEs.