Term of Service Waiver

[whistlingvivaldi]

A firm has around 30 employees and requires one year of service before an employee can participate in the plan. A new partner was brought into the firm who will become a HCE at some point in the next year. He has been allowed to join the plan without fulfilling the 1 year of service. Is this possible? Are they breaking any discrimination testing rules? Are there impacts to other HCE employees or NHCE employees? or Employees who have yet to get the 1 year of service rule. 

 

Thanks! 

[My 2 cents]

Failure to follow the terms of the plan?  While he may not yet be, technically, an HCE, if push comes to shove, it won't look good when it comes to the "facts and circumstances".

What were they thinking when they let him contribute early?  Bet it was discriminatory in intent!

[Lou S.]

Is it possible - yes but probably requires some sort of plan amendment.

Are they breaking rules - maybe (probably)

Are there impacts - yes if corrections are required for breaking rules.

May require amendment to bring in other short service NHCE which may require contributions.

[Bill Presson]

It's also possible there was some kind of entity acquisition and prior service credit was granted that the OP doesn't mention or know about.