Excluded NHCE Owners

[HJ100]

Plan uses the top-paid group election because they have very high earners.  A small group of NHCE <1% owners do not want to participate in the plan or receive employer contributions. Assuming we can pass coverage, can they designate certain employee owners to be in this "Excluded Division"?  How do you define the division (or do you need to) when the only real differentiator is that they are partners who can not participate while in that division?  Thanks for any input. 

[austin3515]

1) they just don’t contribute their own money

2A) Plan NOT top-heavy; use the “each participant is a seperate classification” election for profit sharing and just don’t give them a contribution.

2B) Plan IS too heavy: exclude any direct owners who owns less than 1%. Anyone excluded from the plan is not required to receive the too heavy minimum.
 

both assume you can pass coverage and non discrimination.

[HJ100]

Thanks Austin.  They are Non-Highly due to the top paid group election and the plan is SH non-elective with an additional PS component.  Each participant is in a separate classification.  Since they are NHCE, they'd have to receive the gateway so we are looking to exclude them from the plan as a division or class of participants. Not all direct owners who owns less than 1% will be excluded, just some, so trying to determine how you define that division.

[austin3515]

If they are excluded from the plan no gateway. You could exclude them by name but you would not be able to use average benefits to pass coverage.

note that you could also have 2 SPDs; one for those excluded employees and one for everyone else (so everyone else does not see the list of names). But that would be administratively challenging for a TPA to make sure you always manually edit any new SPDs.

i assume they are already eligible. If not they could irrevocably elect to be excluded PERMANENTLY (perhaps redundant but I have definitely seen people ask if there is any way to revoke their irrevocable election 🤔)

Pretty sure this is an exhaustive list of options unless there is some other differentiator between them and the other sub 1% owners (like job title)