Per Diem Employees

I have a large company whose 401k excludes per diem employees. They have a 1 year, age 21 and 1000 hours requirement for eligibility. Some of these per diem employees have met that eligibility requirement but are still per diem. Are they still excluded from the plan?

Also, there are a few employees who were eligible for the plan then later on became per diem employees. Do they lose their eligibility to contribute?

1 hour ago, Coleboy1 said:

I have a large company whose 401k excludes per diem employees. They have a 1 year, age 21 and 1000 hours requirement for eligibility. Some of these per diem employees have met that eligibility requirement but are still per diem. Are they still excluded from the plan?

Yes, they would be excluded, unless the plan specifies otherwise. They would be non-excludable for your coverage test if they met the age and service conditions.

1 hour ago, Coleboy1 said:

Also, there are a few employees who were eligible for the plan then later on became per diem employees. Do they lose their eligibility to contribute?

The plan document should contain a section that describes what happens when an employee moves from an eligible class to an excluded class.

Agree w/CBZ. We had similar client with per diem exclusion but it was such a hassle to track and in the scheme of things was much simpler and not a material cost (relative to total ER DC & CB) to include these people, so they eliminated that exclusion.

Although my opinion was that it was a permissible exclusion, I think I've seen others opine that this might be a disguised impermissible exclusion of part-time employees regardless of hours. My experience with per diem (on-call) type employees is that they are different than standard part-time employees, but acknowledge this could be a gray area - so safer to include for that reason as well.

The weird thing with my client is they had short elapsed time eligibility, so their per diem exclusion was simply because they didn't want to provide benefits to those employees.

I am not sure I would want to defend this classification exclusion when the long-term, part-time rules become effective. An employer could have a well-developed handbook policy that supported the classification, but in the absence of such, it could be construed as an attempt to avoid the new SECURE law.