Non Discrimination Testing for Amendment Permitting Early Entry Into 401(k) Plan

The plan allowed 1 HCE and 2 NHCEs to enter the plan prior to satisfying the eligibility requirements.  My understanding is that the amendment needs to pass 401(a)(4).

My question is ... who do we include in the 401(a)(4) test - eligible employees, or ineligible employees?  Thanks.

1 hour ago, PensionPro said:

The plan allowed 1 HCE and 2 NHCEs to enter the plan prior to satisfying the eligibility requirements.  My understanding is that the amendment needs to pass 401(a)(4).

My question is ... who do we include in the 401(a)(4) test - eligible employees, or ineligible employees?  Thanks.

The amendment needs to be non-discriminatory, that does not necessarily mean 401(a)(4), it usually means benefits, rights, & features.   While you can early enroll any non-hce on an ad-hoc basis; HCE's must be enrolled with all other non-hce's that would otherwise enter under the same service conditions, including part-timers!!

4 hours ago, Nate S said:

The amendment needs to be non-discriminatory, that does not necessarily mean 401(a)(4), it usually means benefits, rights, & features.   While you can early enroll any non-hce on an ad-hoc basis; HCE's must be enrolled with all other non-hce's that would otherwise enter under the same service conditions, including part-timers!!

There is so much wrong in this text. Benefits, rights and features are also tested under 401a4. There is no requirement to include any specific nhces in the testing. Unless you're talking about including people as not benefiting in the fractions.

17 hours ago, Mike Preston said:

There is so much wrong in this text. Benefits, rights and features are also tested under 401a4. There is no requirement to include any specific nhces in the testing. Unless you're talking about including people as not benefiting in the fractions.

I'm talking about the fact that you can't early entry a HCE, if you don't also early entry any nonHCE's who would otherwise qualify under the same conditions.  It appears that was done here so likely ok.  BRF then gets checked, "Different rights or features exist if a right or 
feature is not available on substantially the same 
terms as another right or feature" under the classification test.  This would be considering only that group of participants that the BRF applied to.

On 2/25/2022 at 12:26 AM, Mike Preston said:

There is so much wrong in this text. Benefits, rights and features are also tested under 401a4. There is no requirement to include any specific nhces in the testing. Unless you're talking about including people as not benefiting in the fractions.

Let's say there are 3 HCEs and 7 NHCEs (group A) who are eligible because they satisfied the age and service requirements.  There are 2 HCEs and 10 NHCEs (Group B) who are not eligible.  1 HCE and 2 NHCEs from group B were allowed premature entry.

Is my 401a4 based on Grp B:  1/2 HCEs and 2/10 NHCEs for 40%

Or is it based on Grp A:  1/4 HCEs and 2/9 NHCEs for 88.89%

Hope this question makes sense.  I am trying to determine the correct numerators and denominators.  Thanks for your help.

You have to pass your testing after the plan amendment, based on whatever the lowest eligibility was that let those three people in early.  If they were let in immediately on hire, then the one HCE and 8 NHCEs from group B who weren't let in are non-benefiting but non-excludable.  If you let the three folks in early after, say, 6 months and age 19, then those are the parameters for your coverage testing.  And some from group B may not be benefiting (we know of three who are) but you no longer can exclude those from the testing itself.  But some even-more-newly-hired folks from group B may be just as excludable now, too, because they wouldn't have met the more lenient parameters you let those three slide on.

Interesting.  Thanks for your insights.  My question though is how does this analysis show that the amendment itself is non-discriminatory?  I would have thought the numerator would consist of folks benefitting from the amendment.  There is always something new to learn!

Sounds like you pass coverage. Now talk about non discrimination.