excluding "on-call" pay and hours

[M Norton]

Non-profit organization has two full-time employees in management positions, neither of which is highly compensated. 

They also have nurses who are on-call and will receive $2-$4 per hour for being on-call.  Each nurse is on-call 24 hours per week, which means a nurse would have 1,000+ in a year just for on-call time.

A nurse may be called in on a case, and would be paid regular hourly compensation (at a nurse's regular pay rate) for those hours.

The question is whether a 401(k) plan can exclude the on-call time and pay for eligibility, participation and contribution calculations.

Thanks!

[ESOP Guy]

The plan can exclude the compensation.  it just needs to pass all the various non-discrimination testing.  It sounds like the primary test to look at is the 414(s) test but you are a bit thin on details.  So you might have to do other tests. 

I have never seen a plan exclude some hours and include other hours.  I am thinking that isn't allowed.  

If the plan can pass testing I guess they could exclude these employees.  

You seem to imply there are no HCEs which obviously would make passing testing easier. 

[Larry Starr]

51 minutes ago, M Norton said:

Non-profit organization has two full-time employees in management positions, neither of which is highly compensated. 

They also have nurses who are on-call and will receive $2-$4 per hour for being on-call.  Each nurse is on-call 24 hours per week, which means a nurse would have 1,000+ in a year just for on-call time.

A nurse may be called in on a case, and would be paid regular hourly compensation (at a nurse's regular pay rate) for those hours.

The question is whether a 401(k) plan can exclude the on-call time and pay for eligibility, participation and contribution calculations.

Thanks!

Raises interesting questions in my mind.  First, since there are no HCEs, the employer can give each employee whatever they want as an allocation and never have a problem, so the correct question to ask the client is "what do you want to allocate to each nurse and on what basis".  Once you know that, you should be able to put it into language that works.  

Now, more specifically, the client shouldn't care about eligibility with regard to whether the on-call hours apply or not, because (again) the end result is always "what is your desired result for allocations" since you can clearly make that happen.

The interesting question I have is the allowance for payment for on-call at a rate of $2-$4. That clearly will violate every minimum wage law in the country for paying people for work.  So, this is paying people NOT for work but to be available to come in when called.  Would those "hours" count in the 1000 requirement? Would they count as hours NOT worked so only count to the extent of avoiding a break in service? Not sure.  If they do "count", how is the violation of minimum wage reconciled?  Just an interesting issue; I can't research it now but would love to hear what others would think.

[rr_sphr]

From my compensation/payroll days, this pay is generally considered hours NOT worked under FLSA -- this would be considered more as a bonus than wages per hour.  It would need to be added into overtime calculations but not minimum wage.

Does the 401k plan compensation currently exclude bonuses?   

[Lou S.]

DOL fact sheet may be helpful. I don't know it has any legal authority but it is a nice guideline

https://www.dol.gov/whd/regs/compliance/whdfs22.pdf

Here is what it says about "On call time"

 

Quote

 

On-Call Time: An employee who is required to remain on call on the employer's premises is working while "on call." An employee who is required to remain on call at home, or who is allowed to leave a message where he/she can be reached, is not working (in most cases) while on call. Additional constraints on the employee's freedom could require this time to be compensated.

 

 

 

 

[CuseFan]

For what it's worth, I recall years ago a unionized hospital client had a similar issue with respect to such hours and credited hours were a direct factor in the determination of benefits. I think they got a legal opinion that those hours had to be counted, not sure if pursuant to DOL rules or the CBA, and went through a massive correction process to correct accrued benefit calculations.

[M Norton]

Just FYI - TAGData says you have to count the hours, because the nurses are being compensated for their "on-call" time.  They said, "when an employee is on-call and is being compensated, that employee is "engaged to wait" rather than "waiting to be engaged".  They cited a PL ruling 8031091.

Thanks to all for your input.