"I know the IRS has said you can define your otherwise excludable employees either by direct reference to 410(a)'s statutory dates, OR you can use the plan's entry dates, OR you can ignore entry dates (like one might do under a strict reading of the carve-out rule).
I normally like my exclusions as defined under 410(a). But, I've got a testing situation where a 2021 HCE was hired early January 2020, made his
200K in earnings, became match-eligible as of APRIL 1, 2021 (one YoS, age 21, quarterly entry), and then terminated a few weeks later after becoming eligible for a big hunk of match. So, before his July 5, 2021, latest possible entry date under 410(a). And therefore, I'd normally deem the guy excludable.
This is not for ADP purposes -- his plan is safe harbor. But, it needs to be aggregated for 410(b) purposes with a
second plan within the entire controlled group.
The other plan is slightly different because its match eligibility is one YoS, age 18, and monthly entry dates. (And its SH match formula is slightly different, too.)
The hundred dollar question (oh, we'll bill them more than that) is: Should I be defining my excludables based on whichever plan the employer sponsors?
For instance, since my HCE
guy is in the quarterly entry plan, he's not excludable because he properly came in on April 1 after his year.
But let's say I have two employees, one each at separate companies in the separate plans. Let's say they both started 5-15-2020 and terminated 6-12-2021. The guy in the quarterly-entry plan would be excludable (terminated before 7-1) and the guy in the monthly-entry plan would not (entered 6-1), presuming
I'm using a 'plan's entry date' approach. Does that sound like an appropriate approach, as opposed to using one set of criteria for both groups of employees?
I have to pass the average benefit percentage test for the quarterly-entry plan because its ratio percentage is in the 40s (SH% = 23.75) so I need to be sure who's in the 'main' test out of both groups of employees. And I don't want that lone HCE
on his own, as the otherwise excludable test for his plan would also fail 410b and require extra employer contributions for ABPT purposes....maybe a lot."