0 hours for eligibility, 1000 hours for benefit

Hello,

We've got a plan with 0 hours required for eligibility and 1,000 hour required for benefit.  1 owner that works 1,000 hours and 2 employees that don't work 1,000 hours.  Are we going to have testing issues?  Are one of these employees going to need to benefit?

Thanks!

Maybe.

Have any of the employees EVER worked 1000+ hours in any year? If not you can probably test them separately as otherwise excludeable employees.

But either way you are going to have give top heavy minimums.

I am assuming you are referring to a DB/CB plan.  Since you have 3 people in the Plan, at least 2 of them must receive a meaningful benefit to pass 401(a)(26).  This is for 2022.   For 2023 and onward you might want to evaluate the efficiency of the whole design with zero hours for eligibility.

self-correcting - the above is assuming they have worked over 1,000 hours in prior years.

Ok, thank you.  Never 1000 hours in any year.  I was thinking Top Heavy may be a problem..

5 hours ago, ajc0202 said:

Ok, thank you.  Never 1000 hours in any year.  I was thinking Top Heavy may be a problem..

Top heavy is a problem. If they're participants on the last day, they get top heavy minimums and likely required gateway. Doesn't matter what the allocation requirements are.

Actually it's getting to 1000 hours, rather than the last day, to qualify for a DB plan's top heavy minimum.  

Even if they don't work enough to automatically qualify for a THM, they might end up needing something that large, anyway, to pass the 401a4, depending on what the owner is getting.

Sure DB TH minimum is 1000 hours, but DC TH minimum is employed on last day of the year. So at a minimum they are going to need to get a DC TH min. But the coordinated TH language between the plans should tell them how much and which plan or plans.

Ok, thanks.  Yeah, this is messy.  They do have a 401k plan, but they have not been tested together as the DB is a Safe Harbor fully insured plan (with life insurance - yay).  The DC didn't end up getting this same entry provision.  It was added to allow the owner's husband in the plan when there were no other employees.