Exclude HCE from 401(k) plan w/out provision?

[TPApril]

401(k) only plan, no match or nonelective contributions excludes all HCE's from plan, but without a formal provision in the plan document. One recent NHCE who became HCE stopped participating on change in status. Plan sponsor prefers not to write this into the plan. What if an HCE insists to participate?

[david rigby]

Does the plan document allow Plan Administrator discretion to exclude HCEs?

In other words, follow the document. If necessary, amend it.

[jpod]

So, the employer went to the trouble of setting up a plan, filing 5500s, distributing SPDs, etc., but is afraid of a little testing each year?

[My 2 cents]

401(k) only plan, no match or nonelective contributions excludes all HCE's from plan, but without a formal provision in the plan document. One recent NHCE who became HCE stopped participating on change in status. Plan sponsor prefers not to write this into the plan. What if an HCE insists to participate?

Perhaps they took the former NHCE who became an HCE aside and made him or her an offer they couldn't refuse.

Not that participation in the plan is so fabulous to begin with (no match! no non-elective contributions!), but isn't it just a bit troubling that there is a secret policy, undocumented in the plan, that HCE's cannot participate? Is this the same employer from another recent post who doesn't want to spend any money on the plan and whose HR people don't want to have to spend any time or effort on the plan?

[TPApril]

@My 2 cents - no it's not that employer

...

this employer has separate ER only xtested plan in which HCE's benefit. But there will still be those HCE's who do not reach their max annual additions in that plan.

[jpod]

Interesting. So if your compensation last year was $1 less than the threshold you sit at the kids' table but if you get a raise of $1.50 you can sit with the grown ups? Good plan design.

[My 2 cents]

Interesting. So if your compensation last year was $1 less than the threshold you sit at the kids' table but if you get a raise of $1.50 you can sit with the grown ups? Good plan design.

I think the issue here is that it is not explicitly part of the plan design - the plan doesn't apparently actually say anything about no HCEs allowed. So think of it as more along the lines of not being allowed to sit at the popular kids' table.

[jpod]

I was referring to what seemed to be an arbitrary eligibility rule for the other plan: all HCEs are automatically in the employer funded plan.

[K2retire]

If it's not in the document that HCEs are excluded, am I the one one troubled by operating the plan differently than the document requires?

[Belgarath]

Nope. I just suspect that this is so obvious that everyone is accepting it as a given that it is impermissible if the document doesn't permit it, and instead some tangential issues are being discussed.

[TPApril]

fwiw - my understanding is that all HCE's are aware of 401k plan and ability to participate, but through discussions (which I was not part of), they have chosen to not participate.

It sounds like Plan in question will be excluding Partners and Associates moving forward, as defined in the restated plan document. Coverage testing will continue to include them.