I've been asked to review/comment on a multi-year proposal DB/PS/K and want to make sure rust hasn't totally corroded the brain.

DB&PS are permissively aggregated for testing, and a 2 YOS wait is used for both. Plans are top heavy.

Since K plan cannot have a wait more than 1 year, an NHCE is included in the illustration with a deferral only. He is indicated as excluded from the PS and DB and at such point would have 2 Years of Service.

So, I think a top heavy minimum is being overlooked due to the deferral. Agreed?

Second, I have it ingrained in my head that "an employee" must receive a gateway allocation if he/she benefits under the plan, unless he/she is separately tested as an otherwise excludable employee.

In this case the employee benefits because he gets a top heavy contribution. He cannot be excluded as an "otherwise excludable" under 1.410(b)-6(b)(3) because that rule is "(applied without regard to section 410(a)(1)(B)" which is the 2 YOS or age 26 stuff.

So, does in this fact pattern the receipt of a top heavy contribution generate a gateway requirement? Does that cause a need for inclusion in the a(4) test?

Thanks.

"Second, I have it ingrained in my head that "an employee" must receive a gateway allocation if he/she benefits under the plan, unless he/she is separately tested as an otherwise excludable employee"

no, this is not true. an employee must only receive a gateway if they receive a nonelective contribution.

now, in this case, since there is a 401k, and the plan is top heavy, the individual must receive the top heavy. since a top heavy is a nonelective contribution, then the person must receive the gateway. if the document does not contain gateway language then you can only give the person additional contributions through a corrective amendment.

yes, the person is going to show up in the test.

I believe the answer is "Yes", requirement of Top Heavy Minimum does generate a requirement under the Gateway. I assume that the person can't be otherwise excludable using the 1 year period.

Oh. I see Tom beat me by about 2 seconds. Nice that we agree, but I usually do see Mr. Poje's counsel as very wise.

Thanks for the comments.

And thanks for the correction to my definition, Tom, I certainly agree. And you make a valid point on the document.

In this case however there currently is no document so I can do as I wish in that regard.

Allow me to rephrase my questions considering those initial comments and points:

401(k) eligibility is immediate. Eligiblity for DB and PS is 2 YOS. The plans are top heavy. The top heavy minimum is provided in the PS plan. The minimum gateway for general testing is 7.5%.

A non-key, NHCE who has 1/3 YOS defers.

(1) He must get a 3% PS (not 5% because he is ineligible for the DB) to satisfy top heavy requirements, even though he only had 1/3 YOS, right? I think so.
(2) Must he get the extra 4.5% to get to the 7.50% gateway? I think not.

In the following year, he has 1 1/3 YOS and defers. He is ineligible for the PS or DB because they have 2 YOS eligibility provisions.

(3) He must get a 3% PS contrib, right?
(4) Must he get the extra 4.5% to get to the 7.50% gateway? I think so because even though is is not eligible, he has an employer provided nonelective benefit, and the non-excludable rule cannot be applied because that only covers 1 YOS.

Agree?

1/3 - I agree assuming you are disaggregating otherwise excludable employees

1 1/3 - I agree assuming the person isn't still otherwise excludable. After all you could hire someone 9/1/07 and they would have over 1 1/3 YOS by the end of the year, yet they are still otherwise excludable.

AndyH

I would agree that in your first scenario, the participant must get the TH min, but need not get the gateway as he can be considered an OEE.

For your second scenario, I mostly agree. The reason I say mostly is that at 1 1/3 YOS, (s)he may still be an OEE because they may not have met the entry date (using statutory entry dates). For example plan year is a calendar year. Ptp is hired on 8/1/2007. If you use the statutory entry dates, he would be an OEE for 2008 and 2009 as he did not complete the YOS by the statutory entry date of 7/1/2009. If you are using plan entry dates and the ptp completes the YOS prior to the last entry date, then (s)he must get the gateway.

Hope this helps.

I think we agree but here's some more specifics to be sure.

The person in question is hired 10/31/08.

Plans years are calendar.

Assuming semi annual entry in a plan with a 2 year wait he is eligible 1/1/2011, but I think he needs a 7.50% gateway for 2010 because the OEE rule only works with 1 year of service wait 410(A)(1).

So, for 2010, he is ineligible but gets a 7.50% gateway. How is he treated in the general test? As a nonexcludable I guess, right?

Thanks for the help.

Tru dat!

Thanks for the answers. How bout shipping me a few dozen temperature degrees as well. My daug won't walk herself.

Hey, it's still suntanning weather. As of 3:45, a balmy 7 degrees Farenheit here in the frozen North, with a nice, brisk northwest wind. As the saying goes, a "fine, large day."

Tom, I think you've got your seasons mixed up for your wardrobe. If you have to wear that thing in the Florida heat and humidity, no wonder you are Grinchy!

And speaking of Grinchy and going off-topic, has anyone heard any further rumors about a delay on the regulations regarding fee disclosure? I haven't...

Bah. I must find a way to keep Christmas from coming
..
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.I have too much work to do before then
so in the meantime, enjoy a bit of winter condolences with the following:

http://dalesdesigns.net/winter_poem.htm

I don't know if this plays into this at all, but here goes:

TH contributions are based on full year compensation, whereas you can limit the "normal" PS to only compensation earned while a participant. But, if the 3% TH comes out to more than the gateway, you use the greater dollar amount.