statutory exclusion for ADP ACP test

[Tom]

Plan has 6-month waiting period for deferrals with entry on the first of the following month.  I know I can exclude those with less than a 12-month wait but I am wondering about the entry date.  The plan has monthly entry date for deferrals and match (no SH nor PS).  I'd like to apply the semi-annual date which would remove lots of zero NHCEs. I know it would be more conservative to use semi-annual. 

Thoughts?  Thank you

 

[Lou S.]

You can use statutory exclusions of 21 & 1 with dual entry for testing if that's what you are asking.

[Tom]

Excellent - thank you. 

[truphao]

On 4/10/2024 at 6:44 PM, Lou S. said:

You can use statutory exclusions of 21 & 1 with dual entry for testing if that's what you are asking.

The maximum statutory exclusion is 21 & 1 plus 6 months waiting, isn't it?  For example, somebody hired 9/29/2022 is statutory excludable until 3/29/2024 although DOP = 1/1/2024.

[Bri]

13 hours ago, truphao said:

The maximum statutory exclusion is 21 & 1 plus 6 months waiting, isn't it?  For example, somebody hired 9/29/2022 is statutory excludable until 3/29/2024 although DOP = 1/1/2024.

Not quite, if the first day of the next plan year comes up sooner, that takes precedence over the 6 months.  See 410(a)(4).

[truphao]

It was a really bad example on my part, here is an attempt #2: DOH = 3/29/2023, DOP = 7/1/2024 (dual entry), but will be statutory excludable until 9/29/2024.

[Bri]

Technically, this #2 guy is a statutory exclusion, like let's say the guy termed on 9-15-2024. 

But the IRS allows for multiple interpretations for plan sponsors to take on how they sort out these people.   They'd be okay if you didn't consider them excludable, since the plan's entry date for the person would have passed on 7/1.  They also permit the interpretation to say the employee stops being excludable right at the 1-year anniversary date in March.

(I've used software that lets you choose the interpretation your sponsor wants.)