mandatory automatic enrollment count... and part-time employees

Talking to a potential plan, and there are two f/t employees and 10 who are 'half-time'.  Assuming that these people really do work only half of a f/t schedule, do the rules really let us treat this as 2 + (10 x 50%) = 7 and therefore exempt from the mandatory automatic enrollment?  I realize that it might be safer to just include it for many reasons, but if the client is really against it... it's OK, right?  Thanks.

The proposed regulations say that you count employees using the rules of 54.4980B-2 Q&A-5. Which says...

Quote

(d) In determining the number of the employees of an employer, each full-time employee is counted as one employee and each part-time employee is counted as a fraction of an employee, determined in accordance with paragraph (e) of this Q&A-5.

(e) An employer may determine the number of its employees on a daily basis or a pay period basis. The basis used by the employer must be used with respect to all employees of the employer and must be used for the entire year for which the number of employees is being determined. If an employer determines the number of its employees on a daily basis, it must determine the actual number of full-time employees on each typical business day and the actual number of part-time employees and the hours worked by each of those part-time employees on each typical business day. Each full-time employee counts as one employee on each typical business day and each part-time employee counts as a fraction, with the numerator of the fraction equal to the number of hours worked by that employee and the denominator equal to the number of hours that must be worked on a typical business day in order to be considered a full-time employee. If an employer determines the number of its employees on a pay period basis, it must determine the actual number of full-time employees employed during that pay period and the actual number of part-time employees employed and the hours worked by each of those part-time employees during the pay period. For each day of that pay period, each full-time employee counts as one employee and each part-time employee counts as a fraction, with the numerator of the fraction equal to the number of hours worked by that employee during that pay period and the denominator equal to the number of hours that must be worked during that pay period in order to be considered a full-time employee. The determination of the number of hours required to be considered a full-time employee is based upon the employer's employment practices, except that in no event may the hours required to be considered a full-time employee exceed eight hours for any day or 40 hours for any week.

If the half-time employees come out as 50% under this rule, then I would agree with your calculation and the plan would be exempt from automatic enrollment.