Please help.

We started a 401(k) in August 1999. We waived the 1 year eligibilty for all current employees. Our plan document allows age 18 to participate. We have 2 HCE and 4NHC participating for 1999. Bothe HCE are over 21 and have been with the company for years.

If we include all employees we fail our ADP/ACP tests. If we exclude the two employees who are under 21, we pass the test.

I do not understand SBJPA section 1459 where it says they must pass a test of their own? Do we run a separate test with just those two people and no HCE in the group?

Do our documents need to say anything to include only those over 21 for the tests?

Can we just run the tests with the employees over 21 and ignore the other two?

Thank you!

statutory exclusions is an 'option', so does not have to be included in the document.

you didn't mention numbers, but remember,1st year of the plan, you can use 3% for the NHCE in the testing.

finally, at least as far as I can tell in the new regs, they clearly state that NHCEs who fail the statutory exclusions 'may' be excluded from testing. see 401(k)(3)(F)
The whole purpose of the new regs was to encourage more liberal requirements...well, it looks like the first year of the plan you could easily end up with a free ride, so to speak, for the HCEs. they are the only ones in the test using the current year method of testing!