We just tookover a plan that uses a nonstandardized prototype and has a "special amendment" attached which incorporates a new-comp PS allocation (the document sponsor approved the amendment).

The plan is TH. Employees are allowed to immediately defer to the 401(k) on their date of hire, but must wait 1-year for a PS allocation.

Normally I would use the otherwise excludable rule and only give a 3% TH min to employees with less than 1-year of service. Employees that satisfied the 1-year wait get the gateway minimum.

The document does not specifically address the otherwise excludable rule or permissive disaggregation for coverage or testing purposes. Is it okay to use the rule?

It should be noted that the document was amended for the final 401(k) regs., and under that amendment it says it is allowable to disaggregate for ADP testing purposes.

Any thoughts are appreciated.

You don't need language in the plan doc to disaggregate the otherwise excludable group...

This is not related to your question, but you should be aware that the "special" amendment has now made the plan an individually designed plan. Keep this in mind when determining the restatement deadline for the plan.

ak2ary - I also thought these methods were optional, but we started to use Accrudraft plans over the last few years, and they require you to specify a methodology in the plan. Anyway, thanks!

Pensions in Paradise - Appreciate the input. An ERISA attorney actually did this amendment for the client and this issue was bought up. The prototype w/amendment was forced on the client by their investment provider who refused to work on a custom document. They didn't want to leave the provider.

Understood. Just be aware that the plan will HAVE to be submitted when they restate for EGTRRA. They will not be able to rely on the prototype opinion letter.