Ok - it's time to beat that dead horse... I have a 401(k) using the safe harbor match. They have no eligibility to defer & participants enter on the first of the month coincident or following hire date. I know I can use my age 21 & year of service exclusion for safe harbor $, but my question is this: Let's say we have an employee hired in 2002 who entered and began deferring at hire (06/01/2002). This same employee NEVER works over 1000 hours, but is age 21. If I use the "year-of-service" exclusion, she will never have a year-of service (YOS defined in this plan as 1000 hours in a plan year). Does that mean I can exclude her indefinately from the safe harbor match? It doesn't seem right to me?!?!? I thought she should get the match for 2003. Thanks in advance! Patti

Based on the facts you've given it seems right to me. If Plan requires 1 yr of service and the employee doesn't complete the 1,000 hrs during an eligibility she isn't eligible. (I am assuming Plan uses actual hour method).

Thanks R. Butler! Yes, the plan uses the actual hours method.