Safe Harbor & Participation Comp

We know you can exclude pre-participation compensation from the safe harbor contribution.  What about post-participation compensation where the employee moves in the same plan year to a position that is not an eligible employee?

For example, an employee is hired in a non-union position, enters the plan in 2018, and then later in 2018 moves to a union position that is not eligible for the safe harbor.  Can the compensation paid to the employee after the employee moves to the union position be excluded? 

To phrase the more question more precisely (since everyone is going to ask what the plan says), can the plan provide for such an exclusion (assume all the notice requirements and other requirements of safe harbor are met).  I read the regs to say the comp. can be excluded, but I have just never seen this before.  

Good question.  My document uses the language "exclude compensation before participation"   AND "limit the definition of Compensation to only that compensation paid to an employee while (s)he is a Plan Participant" for the same exclusion.  To me, the its pretty clear that the intention is to only count comp while eligible, so a newly ineligible participant would only count comp while eligible as well.  

I agree. I think the only time you're required to include compensation while not a participant (other than when the plan says to) is for top heavy.

the most recent LRM issued by the IRS had the following.

while this was referring more so to an allocation by group method, I don't see why the same logic wouldn't apply.

The employer will specify in written instructions to the plan administrator or trustee, by no later than the due date of the employer’s tax return for the year to which the employer’s contribution relates, the portion of such contribution to be allocated to each participant allocation group. The employer contributions allocated to each participant allocation group will be allocated among the employees in that group in the ratio that each employee’s compensation, as defined in section _____ of the plan, bears to the total compensation of all employees in the group. In the event that an eligible employee is included in more than one participant allocation group, the participant’s share of the employer contribution allocated to each such group will be based on the participant’s compensation for the part of the year the participant was in the group.

The check box in the FTW Adoption Agreement that excludes pre-participation pay says "Exclude pay earned before participation in the Plan." (I added the underline.)  There is a note under that checkbox which says "NOTE: If selected, Compensation shall include only that compensation which is actually paid to the Participant during that part of the Plan Year the Participant is eligible to participate in the Plan."  

I think that note is enough to allow the employer to interpret the plan to exclude compensation paid to a newly ineligible participant.