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Posted

I am working with a doctors office and their 401k plan.  They currently have a One year of service/1000 hours eligibility requirement to enter the plan.  However, they would like to change that to 6 months elapsed time requirement for new doctor hires.  The new doctors would not be owners.

If the new doctors make less than $130,000 (2021) and are not HCEs in their first year employment, then there would not be a discrimination issue for 2021, is that correct?

What if in future years their earnings are above the HCE dollar threshold?  Is that something that could be viewed as discriminatory a year or 2 after they are hired?  I would not think so since I think any eligibility discrimination would be applied in the year of hire.  But I wanted to check if that is correct?

Thank you

Posted

I did something similar recently, but can't seem to find any of the analysis at the moment. I do recall being comfortable enough that it was defensible, although not perfectly clear, on the theory you mention.

Posted

Keep an eye out for any other employees (non-doctors) that aren't allowed in under the same 6 month period, of course.  Since 410(b) testing generally uses the lowest eligibility under the plan for everyone, you might inadvertently have a bunch of extra non-benefiters among your NHCEs.  (Blah blah blah disaggregation etc.....)

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