NHCE moving to excluded class

[Cynchbeast]

Plan is currently a (New Comp) PS/401(k) plan with no exclusions. Sponsor wants to amend to exclude one class of employees effective 01/01/16.

What happens to an NHCE who is currently a participant in the plan and becomes a member of the excluded class on 01/01/16?

[Lou S.]

They would no longer be an active participant in the plan. They would continue to accrue vesting service.

It is very similar to when a plan excluded collectively bargined employees and a previously eligible employee goes from being non-union to union.

Except in this case for coverage you would probably have them as a non benefiting employee for certain tests where collectively bargined employees can generally be ignored.

[ESOP Guy]

the other thing to remember is this person would still be in the coverage test as includable but not benefiting.

That may be obvious but thought I would add that.

[Doghouse]

Must such an individual receive any top heavy minimum?

[Bill Presson]

Must such an individual receive any top heavy minimum?

No.

[Cynchbeast]

Thank you all; that answers my questions re PS contributions. Can I infer from this that this newly excluded NHCE (who is already a 401k participant) may be prevented from further deferrals?

If not, he would be getting a 3% SH NEC; which I assume would necessitate including him in PS for an additional 2% in order to pass the gateway minimum allocation.