PART II - STANDARDIZED PLAN PROVISIONS 87. Coverage

Statement of Requirement: Code § 410(b) ; Rev. Proc. 2023-37, 2023-51 I.R.B. 1491, sec. 9.03(1)

Sample Adoption Agreement Language:

Each employee will begin participation under the plan in accordance with section _____, except the following:

( ) Employees who have not attained the age of _____ (cannot exceed 21).

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( ) Employees who have not completed year(s) of service (cannot exceed 1 year unless the plan provides a nonforfeitable right to 100% of the participant's account balance derived from employer contributions after not more than 2 years of service in which case up to 2 years is permissible. If the year(s) of service selected is or includes a fractional year, an employee will not be required to complete any specified number of hours of service to receive credit for such fractional year.)

( ) Employees included in a unit of employees covered by a collective bargaining agreement between the employer and employee representatives, if retirement benefits were the subject of good faith bargaining and if two percent or less of the employees who are covered pursuant to that agreement are professionals as defined in section 1.410(b)-9 of the Regulations. For this purpose, the term "employee representatives" does not include any organization more than half of whose members are employees who are owners, officers, or executives of the employer.

( ) Employees who are nonresident aliens (within the meaning of section 7701(b)(1)(B) of the Code) and who receive no earned income (within the meaning of section 911(d)(2) of the Code) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3) of the Code).

( ) Employees who became Employees as the result of a transaction described in section 410(b)(6)(C) of the Code. These Employees will be excluded during the period beginning on the date of the transaction and ending on a date that is not later than the earlier of the last day of the first Plan Year beginning after the date of the transaction or the date of a significant change in the plan or in the coverage of the plan.

(Note to reviewer: A transaction described in IRC § 410(b)(6)(C) is an asset or stock acquisition, merger, or similar transaction involving a change in the employer of the employees of a trade or business.)

(Note to reviewer: The first blank should be filled in with the section number that corresponds to LRM #18. If the plan provides for a single annual entry date reduce each of the limits contained in the sample provision above by ½ year (for example, change age 21 to 20½, 1 year to ½ year and 2 years to 1½ years). This reduction can be avoided if the employee enters the plan on the entry date nearest the date the employee completes the eligibility requirement, and the entry date is the first day of the plan year.)