When eligible becomes ineligible?

I have a document that excludes non-key HCE's. My problem is what happens to participants who enter as an NHCE, and then become an HCE is a future year? The document says that if you go from eligible to ineligible that you immediately cease to participate in the plan. What does that mean? Just that you no longer get a benefit? How do I code this person now? Active? Excluded? They still have a benefit due to them, vested or not. I've been trying to research it, but not having much luck. Most other threads that mention going from eligible to ineligible are based on hours and devolves into another discussion entirely.

Any help appreciated!

Thanks!

Participants in an excluded class typically continue to earn vesting service as long as they remain an employee of the employer, they just can't accrue additional benefits.

They are also a participant for most purposes other than accruing a benefit.  So they have the same rights to notices, payments, loans.... as other participants. 

So you would leave them in the plan, but accruing a $0 benefit? Would they be coded as active still?

If they're still earning vesting, wouldn't they still technically be a participant?

8 hours ago, dougmal said:

If they're still earning vesting, wouldn't they still technically be a participant?

 

They are (if there is a balance), just not entitled to future contributions. 

It feels like that contradicts the document saying that they immediately cease to be a participant. But I just can't think of any other scenario that works, other than continnuing to be a participant with a $0 accrual rate. 

So anywhere in the document that it refers to "participants" these former NHCE's would be included.

If you are describing your document terms correctly, the document is unfortunately drafted. I prefer to use “participant” and it variants to mean someone who is eligible to accrue a benefit or has an account under the plan. I am not fond of “active” vs. “inactive” either because of what is included or excluded by implication (perhaps incorrectly).  For example, an “inactive” participant may still be able to direct investment of the participant’s account. That sounds kinda active to me if I am not familiar with the definitions.

The FTW document says such an employee ceases to be participant...for purposes of Article 4 (contributions), the implication being they are still participants for other purposes. If your document isn't so specific I think that is a (the only) reasonable interpretation. I would count them as participants but they just don't get any accruals.

Ceases to be a participant for purposes of contributions. I like that. Unfortunately, our document just says "Such employee will immediately cease to participate in the plan"

So it's not super clear on what that means. The employee has an accrued benefit, so they fit the definition of a participant, and there is no distributable event to get them out of the plan, so I think I will just have to assume that they are no longer eligible to accrue additional benefits. I'll leave them as active with an accrual rate of 0%.

Thanks!

I think you are making this more complicated than it needs to be because of how you define participant.  I would go back to the plan document. Are you sure none of this is spelled put in the definitions?

If there is doubt, ambiguity, contradiction, or vagueness, the plan administrator should have authority to interpret and should do so in a way that is consistent with the law and proper administration.