Excluding Part-Time Employees From 401(k) Plan

Good morning everyone.  Just a quick question, our document software defaulted to add the following when we entered to exclude part-time employees:

"Notwithstanding the foregoing, any Part-Time Employee who is excluded hereunder will nevertheless be considered an Eligible Employee if he or she is credited with at least 1,000 Hours of Service during any Eligibility Computation Period beginning on or after his or her Employment or Reemployment Commencement Date and is an Employee on the last day of such Eligibility Computation Period"

Is there an issue with removing this language?  They want to exclude all part-time employees, even if they ultimately work 1,000 hours in a year, and they definitely wouldn't have a testing issue.

Thanks everyone!

You need a classification of employees to exclude, like a division or a location or a job category.

See IRC 410(a)(3)(A) and Treas. Reg. 1.410(a)-3(e), Example 3. 

The IRS position on this is crystal clear. They regard it as a violation of Code Section 410 (a) which permits a maximum eligibility condition due to plan eligibility of one year. There are a lot IRS Revenue Rulings from the 1970s and 1980s clariifyng how this rule works.

Part-time/temporary/seasonal is a class of employees.  Once an employee works completes a year of service (1000 hours), they are no longer part of this class.  

The basic plan document should clarify this in addition to the IRC Code and Treas Regs mentioned by Griswold and rocknrolls2.