Part-Time Employee Exclusions & Secure Act

[metsfan026]

I know the Secure Act forces plans to include part-time employees in the Plan.  However, can a plan still explicitly exclude them as a group in the Plan Document as long as it passes all coverage testing?  I thought we could, I just wanted to be 100% sure.

Thanks!

[Belgarath]

I don't think it is that simple. The proposed regs say that the class exclusion can't be a "proxy for imposing an age or service requirement." I suspect it might be generally playing with fire to use this exclusion, if the purpose is to exclude LTPT employees.

Other than the PIA for determining who is or isn't an LTPT, and having the hassle of offering them the deferral opportunity, it isn't otherwise a big deal as far as I'm concerned. No employer contributions required, exclude them for testing, top heavy, whatever.

I'm oversimplifying, of course, and the PIA/hassle is potentially very substantial!

[metsfan026]

Thanks!  Would it be an issue to include them in 401(k) (and I guess, in turn, Safe Harbor), but not the Discretionary Match?

38 minutes ago, Belgarath said:

I don't think it is that simple. The proposed regs say that the class exclusion can't be a "proxy for imposing an age or service requirement." I suspect it might be generally playing with fire to use this exclusion, if the purpose is to exclude LTPT employees.

Other than the PIA for determining who is or isn't an LTPT, and having the hassle of offering them the deferral opportunity, it isn't otherwise a big deal as far as I'm concerned. No employer contributions required, exclude them for testing, top heavy, whatever.

I'm oversimplifying, of course, and the PIA/hassle is potentially very substantial!

 

[Belgarath]

No employer contribution required if they are eligible to defer SOLELY as an LTPT. No safe harbor required, no match required. 

[Bri]

I'm not sure why people would bring in their LTPTs for anything else beyond what they're being forced to bring them in for.  If you want them in for more, change your regular eligibility.

[ErnieG]

For me, the "why not bring them in", aside from the politics of placing the retirement responsibility on the small business owner, is the pricing by TPAs (and rightfully so) of the Owner Only Plan to full pricing.  The TPAs I work with generally have a discounted fee for Plans that have only an owner or owners.  I fear this may be counter productive by that small business owner terminating or not starting, their Profit Sharing 401(k) Plan due to the increased costs to have this category of employee as a participant in the Plan for deferrals only.  

[Belgarath]

A valid point. As a TPA, however, I find it hard to care. Owner-only plans aren't much of a money-maker - we do a very few as a favor for a good broker referral source for example.

Since they don't have to make any contributions for such employees, then if they are maxing out the contribution for themselves, an extra (x) amount for "full" admin fees seems like a pretty reasonable price to pay. Depends upon fee structure, I suppose.