new plan, terminated employees

[gregburst]

If a calendar-year safe-harbor matching 401k plan gets set up in September, and it has a Jan 1 effective date in order to maximize profit sharing, would employees that terminated prior to the date the plan is signed have to be included in the profit sharing allocation/testing? Or could those former employees be automatically excluded since they terminated before the plan was signed into existence?

[Lou S.]

Yes, no, maybe. Depends on how the plan is worded.

If the plan is retro active to 1/1 and the employees worked more than 500 hours they would be included for 410(b) testing whether or not they receive an allocation.