Excluding from testing EE left with less than 500 hours

A standardized prototype is deemed to pass and allows you to give nothing to an employee who terminated with less than 500  hours.  I have a volume submitter document that has each person in their own group. Can I exclude this employee form testing?

I'd say no.  You get to exclude T<500s if there are allocation conditions for receiving an allocation, and those conditions are the *sole* reason the participant doesn't benefit.  

Not sure I'd make quite such a blanket statement. What if the VS still has, say, a 1,000 hour/last day allocation requirement? 

2 hours ago, Bri said:

I'd say no.  You get to exclude T<500s if there are allocation conditions for receiving an allocation, and those conditions are the *sole* reason the participant doesn't benefit.  

I have never really thought about this before but can you  just game this to hit those conditions?   You put the person in their own group and then declare any group that has a a set of conditions will get an allocation as define for the group?   Your group now didn't get an allocation because it failed to have hit the allocation condition.

I really am asking here as it just came to mind. 

Why kind of testing?  Coverage?  Nondiscriminaiton?

I had meant if everyone was in their own group AND there were no other allocation conditions.  Sure, if there's still a last day/1000 hour rule, then a T<500 couldn't have been allocated to his/her group anyway, because the allocation conditions preemptively excluded him/her from consideration.  So in that case they are still excludable from coverage/401a26.  But with no allocation conditions, the T<500 would still be eligible to get a contribution, and so the reason they wouldn't have is because the employer specifically chose to allocate zero.

Then you are required to include the person in your coverage and nondiscrimination testing.

But on the plus side, if no other 401(a) benefit then don't need to give them gateway.