Subsequent Eligibility Computation Periods

Is it possible for a Plan to use different subsequent eligibility computation periods for different money sources?

For example, a Plan would like to do 1 year of service, with 1,000 hours, for the deferrals and safe harbor match, but do 2 years of service with 1,000 hours for profit sharing. They would like to "switch to plan year" to calculate subsequent eligibility computation periods for deferrals and safe harbor match, but use anniversary of hire to calculate subsequent eligibility computation periods for profit sharing. Is this possible? What additional testing would the Plan be subject to?

Yes, you can do this.... 

Tracking the plan year hours and then tracking anniversary hours will be challenging and I do not envy you or the process.

I can't think of any additional testing.  You just need to know who and when everyone is eligible.

Maybe they can add monthly entry for all sources?  LOL

Good luck.

When using the Ratio Test for coverage testing, each source is tested separately as if it is a standalone plan.  Where the plan has deferrals, a match and a non-elective employer contribution, there are 3 separate Ratio Tests.  In the scenario above, if the deferrals and match each have identical 1 Year of Service eligibility, shifting Eligibility Computation Period (ECP), and entry dates, then the test Ratio Test results should be identical.  The profit sharing contribution Ratio Test would use the 2-year eligibility, anniversary date of hire ECP, entry dates, and any allocation conditions.

If any one of the Ratio Tests fails, then the next step would be to try the Average Benefits Test.  Since the Average Benefits Test applies to all sources, then the most lenient eligibility rules will be considered in performing the ABT (which is the rules used for the deferrals).  If the HCEs are contributing greater percentages of their compensation than the NHCEs (because they can at will because of the Safe Harbor Match), and the profit sharing formula uses new comparability, then there could be a problem passing the ABT.

This is one of those plans where it is helpful to look each year for quirky shifts in demographics that could trigger a compliance issue.

I’m sure it will be super easy to have the plan document and the admin system be set up for 2YOS anniversary years for the PS and the “switch to plan year” method for everything else. 

11 minutes ago, John Feldt ERPA CPC QPA said:

I’m sure it will be super easy to have the plan document and the admin system be set up for 2YOS anniversary years for the PS and the “switch to plan year” method for everything else. 

Should we pile on some "are there any LTPTs?" while we're workshopping this? 

yes, while we are at it lemme suggest to modify BIS rules to be different hours for different sources.  since we are going to calcuate every employee every year by hand anyway....

Thanks for the input. I understand that this isn't an ideal situation, but we are trying to work with the client and get as many of their "wants" into the document as possible.

This Plan historically has had low turn over, and no LTPT, due to the nature of their industry.  They are on a platform that is tracking initial eligibility and we are tracking/allocating their integrated profit sharing allocations for them. Since the profit sharing allocations only happens at the end of the year, I don't expect a significant increase in administrate work. Most times the new entrants will either receive a Top Heavy allocation or a profit sharing allocation.