HCE exception for 401(a)(26)?

[Guest FredReilly]

I thought there would be an exception for DB plans where employer only employs HCE's for 401(a)(26) purposes much like for 410(B) purposes. I cannot find any exception in the statute or reg. If there are only 4 employees and only one wants to participate, it appears that you have to cover two to meet the 40% rule.

Does anyone have a cite for an exception?

[Guest mo again]

I'm sorry to say there's no exception.

[Guest]

You could create a plan that allows them to participate, but at a much lower level than those HCE who "want" to participate.

[Guest mo again]

We have done that, and have also brought in employee-relatives to enhance the headcount. Care must be taken not to preempt any HCE's plan to make a deductible IRA contribution.

[Guest FredReilly]

Thanks, I was afraid of this. Our solution was to give a benefit of somehting equivalent to IRA contributions to a volunteer. There seem to be more and more inconsistencies as the layers of statutes pile up.