401k match contributions condition

Would a plan sponsor of a 401k with a match (non-safe harbor) be able to require exclude certain groups of employees from sharing in the match (regardless of hours worked)?

And then could they specifically say that employees with less than 30 hours/week will not share in the match? (I don't think this would be permitted).

You can exclude reasonable classifications of employees provided you pass IRS nondiscrimination testing. Typically 410(b) coverage in this situation.

I believe an exclusion of "less than 30 hours per week" is not considered a reasonable classification by the IRS and is not allowed.

100% agree - if exclusion was a reasonable job classification then permissible provided such resulting "plan" satisfies coverage. However, any hours-based classification, specific or "veiled", is not considered reasonable per IRS.

What about if the condition (legit) is that these are on-call or as needed employees, who essentially make their own schedule and work the hours that they can/want?  Many in this catagory work less than 1000 hours a year but some, work over 1000 hours.  There is the hours worked element involved but their work is irregular and not necessarily determined by the company.  It sounds like it might still not fly as a condition for sharing in the ER contribution, but, any different thoughts?

Thank you

Others may disagree, and this is likely gray enough to get ERISA counsel involved, especially if the employer and affected populations are relatively large, but I think that employees who are "on call" and/or "per diem" may be different than your standard part-timer and not an hours-based exclusion. I have had clients categorically exclude such, and without regard to actual hours worked, so per diem employees who happened to work more than 1000 hours in a year were still not benefit eligible.

However, if the employer's industry is such that employees frequently shift into or out of on call or per diem status, monitoring eligibility compliance is a pain to say the least. I actually had a client reverse that exclusion because administration was not worth the trouble relative to the cost savings. It was a situation that required balance between corporate finance (cost), HR philosophy, administrative burdens and risk management (compliance).

Another note regarding on call status - if employees are paid (albeit at a reduced rate) to be on call during specific times, then those hours must be credited. For example, say a nurse is paid $10/hour to be on call 24 hours over a weekend, (s)he gets credited for 24 hours whether called in to work 0, 4, 8, 12 or whatever hours - of course you don't double count with hours actually worked. This obviously doesn't apply if these people are excluded.

Good luck, this is not a trivial cut and dried issue and unless it would yield substantial savings is probably not worth the time and effort chasing down that rabbit hole, in my opinion.

I could be wrong but I think the IRS views the terms "part-time", "on call", "seasonal", or similar all pretty much the same and they aren't considered reasonable classifications for exclusion.

Assuming the document is drafted appropriately (and this is in at least some IRS pre-approved documents) you can exclude "part time" or "temporary" or "seasonal" employees, BUT, if any such employee actually completes 1 YOS (1,000 hours) they will no longer be a member of such excluded class.

44 minutes ago, Belgarath said:

Assuming the document is drafted appropriately (and this is in at least some IRS pre-approved documents) you can exclude "part time" or "temporary" or "seasonal" employees, BUT, if any such employee actually completes 1 YOS (1,000 hours) they will no longer be a member of such excluded class.

Yeah it is typically written as a fail safe for plans that have entry of less than 1 year of service for "substantially full time employees" but brings in the employees who actually meet the 1000 hour requirement and have a year of service. But then those employees are in for good even if they return to "part time" status.

I wonder if some of the exclusions will be less used as SECURE will be bringing in long term part time employees next year even if they extended the actual amendment deadline to 2025.

The LTPT rules only allow for them to defer.  has nothing to do with eligibility for match,