Defined benefit plan discrimination testing question

[rodin111]

VS Defined benefit plan requires 1,000 hrs for a year of credited service.

Several employees terminated employment with less than 1,000 (but more than 500) hrs in 2013 and the actuary did not include them in any of the required tests.

Since they are not members of a statutory excludable class, shouldn't they be included as non benefiting participants?

Thanks for your help .

[Lou S.]

Yes. You are correct.

[Andy the Actuary]

So long as employees do not meet one of the other exclusions (union employee), they would be included if they otherwise met the Plan's membership requirements.

[rodin111]

Thank you

[rodin111]

The argument of this particular actuary is that if a year of service is defined as 1,000 hours, any participant that does not satisfy a year of service will not accrue any benefit and should not be included in discriminatin testing. To me that does not sound correct : is as if in a DC plan that require 1,000 hrs and/or last day employment for a contribution we would not have to include those participants in the testing.

My understanding is that any exclusion that is not a statutory one must be included in ND testing.

Is it anything different for the DB plans?

Thanks for your help.... Again

[BG5150]

Did you ask the actuary his or her basis for not including them?

[rodin111]

Yes.

See my answer to Andy

[BG5150]

Ah. my bad

[rodin111]

Any opinion?

[BG5150]

Any opinion?

Me? No. DB plans are far from my bailiwick.

[Lou S.]

Is it anything different for the DB plans?

Not to my knowledge.

Our Non-standardized DB AA points outs something to the effect of - plan may fail discrimination if 1000 rule is used for accrual instead of 500 hour rule.

[Lou S.]

Ask him where in the 1.410(b) regs is there an exception for DB plans to excluded such participants. I've never seen one.

[My 2 cents]

As I recall, anyone who has met the age and service requirements and who has not terminated employment would have to be taken into account in non-discrimination testing. So if someone worked 1,000 hours in 2009 and not since, that person is not considered excludable for testing purposes.

One is supposed to have trouble passing coverage and non-discrimination if one has lots of people not earning any benefits currently. Think of a large company that had the brilliant idea to save tons of money by making everyone work part-time so they would earn no retirement benefits or be entitled to health coverage (management of course would continue to work full-time and get all of those goodies). Should their plans pass?