Ea-2L - Minimum Participation Requirements

Front 1

Minimum participation standards (IRC section 410(a))

Back 1

- A plan can exclude employees from participating in a plan if they satisfy any of the following requirements:
1) less than 1 year of service (can exclude employees w/ 1 yr but less than 2 if the plan provides for 100% immediate vesting)
2) Under 21

- Entry in the plan must be no later than the earlier of 6 months after satisfying the eligibility requirements or the first day of the next plan year.

Front 2

Additional participation requirements (IRC section 401(a)(26))

Back 2

- Only applies to DB plans
- Total participants benefiting (see section of outline dealing with IRC section 410(b) for definition of benefiting) must be equal at least the smaller of:
a) 50 EEs
b) 40% of all non-excludable EE

Front 3

Additional participation requirements (IRC section 401(a)(26)) (continued 1)

Back 3

- A non-excludable EE is one not excluded under the terms of the plan for IRC section 410(a) statutory reasons
1) non-resident aliens who receive no earned income from US sources or EE covered by Collective Bargaining agreement are excludable.
2) Terminated participants who work less than 500 or fewer hours are deemed to be excludable, unless they benefit for the year. Note if a terminated participant is re-employed in the same year, they are no longer excludable, regardless of hours worked.
3) if an Active participant work 500 or fewer hours, they are still deemed to be non-excludable, even if not benefiting

Front 4

Additional participation requirements (IRC section 401(a)(26)) (continued 2)

Back 4

- All employees in a controlled group or an affiliated service group are considered to be one ER for purposes of the eligible employee count.
- Plans benefiting EE from a qualified separate lines of business (QSLOB) under IRC section 414(r) may satisfy the minimum participation rules by treating each separate LOB as a separate ER (not part of controlled group)

Front 5

Additional participation requirements (IRC section 401(a)(26)) (continued3)

Back 5

- plans may not be aggregated to satisfy the minimum participation requirement.
- Plans benefiting only NHCEs automatically satisfy the minimum participation rules

Front 6

Additional participation requirements (IRC section 401(a)(26)) (continued 4)

Back 6

- Multiemployer plans covering collectively bargained EE are deemed to satisfy IRC section 401(a)(26). The collectively bargained EE can be included with the non-collectively bargained EE in order to satisfy IRC section 401(a)(26) if the plan sponsor elects to do so

Front 7

Additional participation requirements (IRC section 401(a)(26)) (continued 5)

Back 7

- A frozen DB plan satisfies IRC 401(a)(26) if it provides a meaningful prior benefit structure (a subjective test)

- A plan must generally satisfy IRC section 401(a)(26) on each day of the plan year. However, it can be treated as satisfying the req. on each day of what the results would be on any other day. The plan does not have to be tested on the same day each year.