Last Day requirement for Match and impact to coverage

[justatester]

Plan has a last day & hours requriement to receive the match. Participant terminates with less than 500 hours. Can the be counted as "excludable" for match coverage test? I know they can for profit sharing.

Thank You!

[Tom Poje]

1.410(b)-7© requires 401(k) and 401(m) to be treated as separate 'plans'

so looking at the match feature as a separate plan you have

1.410(b)-(6)(f)

(i) employee does not benefit

(ii)employee is eligible to participate in the plan [so you have to include someone who otherwise would be eligible due to 1 year/age 21 if they were a member of a controlled group but could not participate)

(iii)plan has minimum svc or last day requirement

(iv)employee fails to accrue a benefit due to (iii)

(v)employee terminates with no more than 500 hours

(vi) if this section (f) is applied to one person it is applied to all employees. [in other words, this is optional, there is nothing to prevent you from including all terminees with less than 501 hours who don't benefit. so ignore this rule if you HCEs who fall into this category and it might help]

the one exception I can think of is if the plan allowed after-tax contribution, since anyone can make an after tax no matter how many hours, and after tax contributions are include in 401(m)

so short answer is 'yes' can be excluded unless you didn't provide all the info....

[justatester]

Thank You! If the plan has after-tax, then they would need to include all. It is not the case in this plan.