Safe Harbor Plan with different elig. and ADP Testing

[buckaroo]

I have a calendar year safe harbor plan that contains the elective deferrals and the safe harbor match. The eligiblity and entry date for the elective deferrals are immediate and on DOH. The eligibility and entry date for the safe harbor match is 1 Year of Service (1,000 hours via actual hours counting) and semi-annual entry dates. The main question revolves around the ADP testing and the determination of the statutory employees and the otherwise excludable employees. In the vast majority of these types of cases, I have determined that if a parrticipant does not completed the YOS using the hours counting, then they would be considered otherwise excludable employees for all purposes until the do meet the YOS requirement.

Recently, I had a discussion with a colleague who says that the determination of statutory employees and the otherwise excludable employees is done on a source by source basis, based on the eligibility and entry date requirements for each source. So, in my example above, the colleague is saying that for the 401(k) portion, the YOS would be determined on an elasped time basis and the SH match portion, the YOS would be determined on an hours counting (1,000) basis. If this is the case, I would then have a problem testing as I would have a group of participants who meet the YOS on an elapsed time basis for the 401(k) and never meet the YOS for the SH match source. This would lead to the problem where you would have statutory employees for the 401(k) who do not receive the SH match. So, would I have to run an ADP test for only the statutory employees who meet the statutory employee defintion for the 401(k) but do not meet the requirements for the SH match? I see no basis for this.

I disagree with his thought process, but I am unable to find a detailed explination regarding how the statutory employee group and the otherwise excludable employee group are defined under the plan rules. Can anyone assist?

[Guest A_Dude]

Umm you do determine statutorally excludable employees on a source by source basis, but you get to use age 21, 1,000hrs service, and on year of service. That's considered the maximum, you do no have to use elapsed time.

[buckaroo]

Thanks for the reply. Does anyone else have an opinion on the OP?

[K2retire]

A_Dude is correct.

[buckaroo]

Just to clarify, are you telling me that I can have a participant classified as a statutorily excludable employee for ADP purposes and not for ACP purposes?

Quick example justs to make sure that I am following:

Elig and Entry date for Elective deferrals: immediate with monthly entry

Elig and Entry date for Match: 3 months and quarterly entry

Elig and Entry date for NEC: 1 YOS and semi-annual entry

Ptp is hired 11/1/2012

The person meets the age 21 and 1 YOS on 11/1/2013. I am using plan entry dates for determination of the OEE group.

In this case, PYE 12/31/2013

the person would be an Statutory employee for the 401(k) portion as they would be treated as entering on 11/1/2013.

the person would be an OEE employee for the 401(m) portion as they would be treated as entering on 1/1/2014.

the person is ineligible for the NEC portion as they would be actually entering on 1/1/2014.

So, the population for the Stat EE ADP test would be different than the Stat EE ACP test. Correct?

[K2retire]

The statutory excludable employees are based on the maximum possible eligibility -- no the plan's eligibility. So that group includes anyone who has not met age 21, 1 Year of Service with semi-annual entry dates.

[buckaroo]

I agree that the determination for OEEs is the based on the maximum possible eligibility of age 21 and YOS. However, there are options as to which entry date is used to determine OEEs. A few of the possibilities are statutory entry date (semi-annual), plan entry date, and 18 months following the completion of age 21/1. If I utilize the semi-annual entry dates, then it would appear that I have the same OEE group for each source. If I utilize the plan's entry date (monthly in my example), then I would have different OEE groups for different sources. Thoughts?

In addition to this, if I use 21/1 and semi-annual entry dates for the determination of OEE group, how/why can I determine statutorally excludable employees on a source by source basis? Continued discussion is greatly appreciated.

[K2retire]

Why would you want to have some sources tested differently -- especially if different means you are more likely to fail the test?

[Guest A_Dude]

It's great that your trying to use full potential of testing etc.. Some advice though; use the KISS method for elgibilty becasue at some point "going to shoot yourself in the foot" probably.