class based allocation chicanery

I've got a client who asked if they could use the xt allocation in the plan to not allocate "profit sharing" (I know, I know) to anyone who doesn't already have an account in the plan.  They have several thousand employees and a lot of turnover (but they are required by donors to have a very generous eligibility provision), so trying to get accounts set up for small employer allocations that are then immediately withdrawn is a hassle - they'd rather direct the contribution to more stable employees.

Acknowledging that there is still a lot of work to do to firmly establish the parameters here... how off-kilter is this idea?  The AA does allow for classes of individual participants.  And they don't necessarily want a match.  They are OK with the allocation going to participants who terminated during the year who have previously opened an account (i.e., deferred).

Let's say that I can pass 410b somehow - maybe by not giving the HCEs any allocation (which would be best for gateway and the rest of 401a4 testing).  Is there anything else that would prevent this kind of skullduggery?

Thanks.

As long as the document says everyone is in their own group, you should not have a problem.  

Simply make sure the nonelective portion of the plan passes coverage and nondiscrimination. Piece of cake!

Do they need generous eligibility for the entire plan?  Or just deferrals?  You can have a short eligibility (or even immediate) for deferrals and conditions for the PS like 1,000 hours and/or a last day condition.  Be careful on that last one.  If they fund the "PS" per payroll, you'll have issues.