Age discrimination

[Draper55]

Is there any overall age discrimination issue in

Choosing the youngest ees to meet the 40% test in a combo plan even if only using the .5% accrual?

[John Feldt ERPA CPC QPA]

Does the plan have language that identifies employees by age directly or indirectly, such as "the formula for group B is 0.50% of pay and Group B consists of employees born after January 1, 1980"?

Does the plan have language that excludes employees by age directly or indirectly, such as "NonHighly Compensated Employees identified by the Employer as 'Apprentice B' Employees are excluded from the plan" - and the employer definition of an 'Apprentice B' employee is any employee born before January 1, 1980?

If the plan has something similar to either of those, you have a problem. Otherwise, no problem.

[Draper55]

I am just listing the group by names. The group of course will be the younger eees..

[Rball4]

If you use age to define allocation groups, then you could have age discrimination issues. If you instead just put everyone in their own rate group and bump up the benefits for the younger people (not defining their benefits based on age, but instead defining them based on Jane Smith being in Group E), then you should be fine. The IRS allows you to discriminate based on age for testing purposes. They just don't want you discriminating in favor of HCE's.

[MWeddell]

You are getting a variety of opinions here.

Whether the criteria is written in the plan document has nothing to do with whether there is age discrimination. It just makes whatever discrimination there is easier to detect.

My own judgment is that if there is a one-year fix, then you probably are OK. However, if this happens for more than one plan year so that a participant, because he/she grew a year older, had a lower accrual rate, then you have a problem. That being said, I suggest you consult with legal counsel for this issue instead of merely relying on message board replies.