Excluded Bargained Employees let into 401(k)

[jsample]

Company maintains two plans - 401(k) for non-union employees and a DB for union employees.

We provide tpa services for the 401(k), another firm provides actuarial services for the DB.

We recently found out that 6 union employees declined participation in the DB plan (?) and the company offered them participation in the 401(k).  These employees were listed on the annual census, but never identified as union employees.  The 401(k) plan excludes Collectively Bargained from plan participation, always has.

I do not believe that this situation can be corrected under EPCRS and in regards to the union employees who were allowed to participate in the 401(k) plan they will have to;

• return deferrals plus earnings, not eligible for rollover, no 10% penalty
• all returns are taxed in the year returned
• 1099-R will use a Code 8
• rerun ADP / ACP testing without these employees
• forfeit match plus earnings

Does anyone know of any solution where the excluded employees could remain in the plan?

Thank you.

[Lou S.]

21 hours ago, jsample said:

Does anyone know of any solution where the excluded employees could remain in the plan?

Thank you.

For them to remain you'd need to retro actively amend the plan to include them. This would likely require the approval of the employer sponsoring the plan as well as the union that governs the CBO.

Lastly if you did that I can't recall if that falls under self correction or would require a VCP.

[jsample]

I believe that there is a difference between ineligible employees and excluded employees.  Self correcting to retroactively let ineligible employees into the plan, who were allowed to participate prior to the plan's eligibility provisions, is easly handled through EPCRS, especially for NHCEs. However, I cannot find anything in ECPRS which addresses the correction of a plan allowing excluded employees participate.

[K2retire]

17 hours ago, jsample said:

We recently found out that 6 union employees declined participation in the DB plan (?) and the company offered them participation in the 401(k).  

 

Does the DB allow people to opt out?

[jsample]

Does the DB allow people to opt out?

That's another issue.  I would assume that the actuary knows the DB plan provisions, but again, I'm assuming...