FAQ 210: 410b--Terminated and rehired employees treated as not benefiting


I have 2 employees that have hire-term-rehire dates. They have no deferrals and no contributions. No matter what I set them as, they will not show up in the "not benefitting" column. Instead, they show up in the "benefiting" column. My auditor wants them in the "not benefitting" column.


The matching and deferral versions of the 410b test read from the "Contrib: Groups Elig." and "Hours" fields in the source specs to determine who is benefiting. If someone is eligible for a deferral and/or match, even if they have not elected to make or receive a contribution, they are considered eligible and benefiting. Were these participants rehired after originally entering the plan prior to their first termination date? If so, they enter on their rehire date, and are eligible for the plan, and therefore, they are benefiting under 410b.

If you want to treat them as eligible and not benefiting, you will need to change their status code to "E". If they are to be treated as not eligible and not benefitting, their status should be "N", and their entry date should be set back to the date prior to the rehire date.