Coverage Testing - No wages paid during plan year.

Plan has 450 employees that are only paid when called to a job site. During 2021 these employees were not paid w-2 wages (no job site work).

The plan has 90 day  service requirement

1. The recordkeeper is assuming these employees are all non excludable for 410(b) testing.

2. Recordkeeper stated "employees with zero compensation are included in the number of non-excludable employees but are not benefiting.  They are considered as not benefiting because they had no compensation and thus did not have the opportunity to defer into the plan or receive contributions."
3. As a result of including this group in the 410(b) test, the coverage test fails.

If an employee has no wages, why are they included in the coverage test?

Assuming they have to be included in the coverage test, how would you correct the failed coverage test?  There is no compensation  to calculate a  QNEC or match

Not sure how to proceed.

Thought was to show them as terminated as of 12/31/2020. Then if they are called to a job site in 2022, treat them as a "rehire".

Thanks

You couldn't even provide a QNEC because their 415 limit of 100% of compensation is 100% x $0 = $0. it is unreasonable to include these people in testing. Agree w/Belgarath. 

Also agree, and for your record keeper's edification, for the reason that these individuals are not employees for 2021.  1.410(b)-2(a) says that a plan satisfies section 410(b) for a plan year... "...with respect to employees for the plan year..."  1.410(b)-9 defines employee as, "an individual who performs services for the employer..."  As these 450 individuals did not get called to a job site, they did not perform services for the employer, and therefore are not employees for 2021.

Also, job site work sounds like union terminology, are these individuals covered by a collective bargaining agreement?