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If a Key EE has a CB benefit and a DC account, yes. The Q&A below are from a Wolters Kluwer (ftwilliam) webinar on top heavy in 2013. Also, it looks like they are of the opinion that a non-key in both the frozen DB and the DC needs 5% for TH. Looking at the regulations, they say "covered" by a defined benefit plan, not "benefiting" in a plan, so it does look like it's 5% for non-keys who are in both plans. If some were excluded from the CB (like maybe non-owner/non-key HCEs) they would only be entitled to 3%. Q. How are frozen plans treated for purposes of the top-heavy rules? A. For purposes of section 416, a frozen plan is one in which benefit accruals have ceased but all assets have not been distributed to participants or their beneficiaries. Such plans are treated, for purposes of the top-heavy rules, as any non-frozen plan. That is, such plans must provide minimum contributions or benefit accruals, limit the amount of compensation which can be taken into account in providing benefits, and provide top-heavy vesting. Note that a frozen defined contribution plan may not be required to provide additional contributions because of the rule in section 416(c)(2)(B). Q. An employer sponsors both a DB and DC Plan and the TH minimum is provided in the DC Plan. If the DB Plan accruals are frozen, what is the TH minimum % required in the DC Plan? A. Frozen plans continue to be subject to the top-heavy rules (typically, top heavy minimum of 5% of compensation is provided by the defined contribution plan - see slide 35).

2nd is much easier to implement

Would we still test the plans combined?

Either of those sound pretty good.

You're spot on, actually. Failure to follow the plan document, for starters....

One lifer DB plan. Plan frozen/terminated 12/31/2025 with perfect funding with excess, if any, going to qualified replacement plan (QRP). Client did not tell me about additional contributions made during 2025, simply forgot. Big amount too. Now have quite an excess but lumpsum still under 415 limit. Solutions for retroactive amendments? Amend to have a retroactive benefit increase Amend from QRP allocation to participant allocation Any thoughts? Thanks

A situation that can become an infinite loop when a claim is in the wings but is not ripe to be made. For example, a QDRO-in-waiting that has not yet been submitted for qualification because a sponsor/participant's estate (which has already submitted letters testamentary to the TPA and stands in the shoes of the deceased sponsor/participant), cannot get the TPA to provide a current account statement. I have a client with that very issue right now (you may recall I'm a QDRO lawyer). Trustee sponsor/participant of very small plan dies after the court enters a property settlement, scant paper records in the decedent's estate, no copy of an executed beneficiary form; estate counsel pretty much ERISA-clueless. Sponsor company has a DC plan TPA'd by one firm, and a cash balance plan administered by another TPA. The cash balance TPA won't pony up a current account statement to the estate administrator/PR, so neither the estate nor the alternate payee for that plan can ascertain what exactly is there that is divisible between the estate and the alternate payee. Then, instead of providing a current account statement and their QDRO procedures document, the TPA decides, unbidden, to retain its own counsel to write a QDRO for the alternate payee (!), which, shocker, does not allocate the full components of the benefit, though nothing in the plan document prevents full allocation. (Of course, I would not allow my client to sign such an abomination.) Additionally, the cash balance TPA's benefit statement from several years ago (the only statement the estate has), is labeled for the sponsor's DC plan (the one administered by a different TPA), includes a single line item for the cash balance plan without identifying that plan as distinct from the entire rest of the statement. This is not a small-estate matter and there is likely 500k+ in the participant's hypothetical account. In 30 years of practice, I have never seen a TPA screw up this badly. I'm counting the misrepresentations, fiduciary breaches, and prohibited transactions, and wondering when they'll stop shooting themselves in the foot before I sue their pants off, as they're not listening to reason. Thank the stars original poster Santo Gold has the wits to ask their learned colleagues here for their thoughts when unsure.

You’re right to be cautious — anytime a 401(k) (especially a self-directed one) starts leveraging plan-owned real estate, prohibited transaction (PT) and UBIT issues immediately come into play. A loan secured solely by plan assets can be permissible if it’s a true non-recourse loan (no personal guarantees, no outside collateral, no indirect benefit to disqualified persons). But if the owners personally guarantee the loan, pledge outside assets, receive indirect benefit, or the brokerage firm earns fees/commissions tied to plan property, that would likely trigger a prohibited transaction under IRC §4975. Even if structured correctly, debt-financed real estate inside a qualified plan can generate Unrelated Debt-Financed Income (UDFI), which may create UBIT filing and tax obligations. Given they’re the only participants (and disqualified persons), the scrutiny risk is higher. This is absolutely a situation where a qualified ERISA attorney or specialized TPA review is essential before proceeding — the structure matters more than the concept.

DSG, in circumstances like those Santo Gold describes, it can be proper for an ERISA-governed plan’s administrator to wait until a claimant has submitted a claim. Then, the plan’s administrator (or its claims administrator, if the plan has such an allocation of fiduciary responsibilities) evaluates the claim. To do so, a fiduciary would follow the documents governing the plan (which almost universally include a default-beneficiary provision, often like the one Santo Gold quotes above), and would follow the plan’s written claims procedure.

If the primary beneficiary predeceased the Participant, the first question is who is the next in line to inherit. I most (?) Plans there is a order of precedence that will look something like this: Designated Beneficiary: As stated in a signed, witnessed writing. Widow/Widower: Spouse. Children: Children and descendants of deceased children. Parents: Surviving parents. Executor/Administrator: Executor or administrator of the estate. Next of Kin: Under state law It appears that ERISA does not set forth a statutory order of precedence, but TSP does: 1. To your spouse; 2. If none, to your child or children equally, and to descendants of deceased children by representation; 3. If none, to your parents equally or to the surviving parent; 4. If none, to the appointed executor or administrator of your estate; or 5. If none, to your next of kin who would be entitled to your estate under the laws of the state in which you resided at the time of your death. and your state law will have a similar statute for intestate succession. In Maryland this is set forth in the following sections of the Estates and Trust Volume of the Maryland Code. § 3–101. Property of estate not allocated by will § 3–102. Share of surviving spouse or domestic partner § 3–103. Division of net estate among surviving issue § 3–104. Absence of surviving issue § 3–105. Absence of heirs § 3–106. Advancements against shares § 3–107. After-born children of decedent § 3–108. Inheritance by parent or parent's relations § 3–109. Relation to decedent through two lines § 3–110. Survival requirements § 3–111. Surviving parents not entitled to distribution from child's estate § 3–112. Parents not entitled to distribution from abandoned child's estate Once you figure out who the beneficiary(ies) will be, then you need to determine how to get the money to them. Usually a family member will have opened an estate and you will deal with the Executor or Personal Representative of the estate. If you know the identity of the beneficiary(ies) and they know they have money coming their way, they will quickly open the estate. If that doesn't work our you need to talk to the Register of Will or the Orphan's Court, whatever they call it, and ask them what to do. And of course you need to contact a local estates and trust lawyer. Of course you cannot keep the money. And of course you need to monitor your Participants and make sure they have designated a beneficiary so this problem does not occur in the future. And of course you should add an order of precedence to the Plan. .

I'm looking into whether correction under ECPRS is required in this situation and want to make sure I'm not missing something. A Safe Harbor plan makes Traditional Safe Harbor Matching Contributions. The AA says the safe harbor matching contributions are based on salary deferrals for the Payroll Period, instead of the Plan Year. The Basic Plan Document says the safe harbor matching contributions must be deposited into the Plan by the last day of the Plan Year quarter following the Plan Year Quarter for which the salary deferrals were made if the employer uses a period other than the Plan Year, which I believe reflects the regs. In operation, the plan has been depositing the safe harbor matching contributions into the plan at the end of the year - not be the end of the following quarter. I believe this is an operational failure under ECPRS and must be corrected? The correction method being adjusting participants for lost earnings from the date the safe harbor matching contributions should have been contributed to the actual date they were contributed? But the plan sponsor and recordkeeper see no issue, say the plan has been operating like this for a long time, and they have no concerns - Am I missing something?? TIA.

I don't think that's a requirement that goes away once it applies, and I expect you had PS here too, so TH did apply. I don't see how you could have a TH combo plan and then freeze CB/stop PS and then avoid TH going forward, that does not make sense to me. Since no one is benefitting in the CB then I think your TH minimum does revert to 3% and which can be satisfied by the SHM. However, if TH, those not getting at least 3% in SHM need a TH allocation, IMHO.

Generally, no, that would not be allowable as it (deposit timing) would be a discriminatory BRF. Maybe 6% owner PS and 0% NHCE PS deposited throughout the year would be OK but as you say, there's no guarantee it would pass testing. If more NHCE PS is then required, would that create retroactive BRF discrimination? Maybe, probably would not know unless and until audited, if ever. Certainly going more than 6% is not a good idea. How important is getting that extra 6% in sooner compared to the possible risk? You can communicate the issues and, where there may be compliance ambiguity, the owner can decide how to proceed and accept any risk (but get it in writing). Another concern may be if PS provision has any conditions for entitlement in the document.

In the circumstances you describe, it seems unlikely that a small-estate-affidavit regime would be effective to transfer title to real property. Or, even if a person acting under a small-estate-affidavit regime could transfer real property, the value of the decedent’s estate (counting all assets) might be more than a State’s small-estate limit. The IRS has directed EP examiners not to challenge a plan for a failure to meet a minimum-distribution provision when the plan’s administrator cannot identify the beneficiary. This is not advice to anyone.

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Let's say a company has 1 owner and a few NHCE participants. They fund 3% SHPS during the year. Can the owner also choose to fund additional contributions to himself during the year? For example, let's say he decides to fund an additional 6% (in addition to SHPS of 3%) in Profit Sharing. Is this allowed? They would pass Gateway, but we don't know if the General Test would be passing based on 9% to owner and 3% to NHCEs. If this is allowed, can he fund more than 3% SHPS plus 6% Profit Sharing to himself during the year, while only funding 3% SHPS to NHCEs? At that point, they would not be passing Gateway and additional contributions would definitely be required for NHCEs to pass testing. Thanks!

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Thank you everyone for the insightful replies. And we find out that there is no will. So, no beneficiary named, no spouse, no children, no will. The plan document only offers the following: "No Designated Beneficiary. Unless otherwise provided in the Adoption Agreement, in the event that the Participant fails to designate a Beneficiary, or in the event that the Participant is predeceased by all designated primary and secondary Beneficiaries, the death benefit shall be payable to the Participant's spouse or, if there is no spouse, to the Participant's children in equal shares or, if there are no children to the Participant's estate." The balance in the 401k plan for the deceased is around $4,000. Will or no Will, I would think that the individual (in this case a brother-in law) who is handling the deceased affairs would need an affadavit or some other means to be able to act on her behalf. While the deceased's is modest, I am told there is real estate matters that must be settled. Action involving that matter would require some authorization allowing the BIL to handle those dealings. That is probably a good starting point to see where that goes. Thank you

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We have a Plan that was once a dual Plan, but has since Frozen the Cash Balance Plan leaving the Profit Sharing Plan to operate as a stand alone Plan for now. It's a Safe Harbor Match (safe harbor formula). The Top Heavy Testing is right on the border, but since it is a Safe Harbor Match I believe they are exempt from the testing and are only required to make the Safe Harbor? I just wanted to make that was still the case, since there would be no Cash Balance Contributions and the Key Employees are only going to receive 401(k) and Safe Harbor Matching contributions. Thanks!

We have seen mistakes in this area before, so I raise this question just as a caution. The lack of a named beneficiary does not, by itself, default to the estate. Virtually every plan will include a "line of succession" to determine a beneficiary, the last of which is the estate. So ... has the plan definition of Beneficiary been reviewed?

Also understand if the estate is small enough in many states the beneficiaries of the estate can use a "small estate affidavit" I am NOT an expert and it isn't really the TPA's job to educate people on them. But we see them on a regular basis and it seems to allow a fair amount of skipping of the probate process. You now know close to 100% of what I know and I am not sure if I helped or not.

To simplify an illustration, I deliberately left out expenses for initial and periodic valuations. About those expenses, the ERISA fiduciary questions and tax law nondiscrimination issues are similar. Would expenses for valuing the almond-ranch business be paid personally by, or charged against only the plan account of, the individual who directs that investment? If so, might such a condition for a directed investment disfavor nonhighly-compensated employees? Or if an expense is not borne by the directing individual alone, is it fair for others to be burdened with extra expense? And each year’s incremental expense for ERISA fidelity-bond insurance might be nontrivial in the small-plan context Dougsbpc describes. An insurer might require a bigger premium because the coverage limit is higher, or because the investment in the almond-farm business might involve ways of handling insured plan assets that lack some controls used regarding fund shares processed by a trust company or a registered investment company.

Not sure how this isn't a PT.... Under ERISA §3(13) states a party in interest as to an ERISA plan includes (C) an employer any of whose employees are covered by the plan... [and] (H) an employee ... of a person described in subparagraph (C)... Since this person is a participant in the plan, presumably he is an employee of an employer maintaining the plan. ERISA §406(a) prohibits various types of transactions between a plan and parties in interest including a direct or indirect ... transfer to, or use by or for the benefit of a party in interest, of any assets of the plan. Even if you use the one bite of the apple principle that might allow the initial purchase to be exempt, the ongoing business aspect of this investment seems fraught with risk.

This seems to run afoul of the rules that the plan asset cannot be used personally by the participant. Consider that a participant can invest their account in works of art, but cannot hang the works of art over their mantle at home. Similarly, a participant can invest their account in a antique car, but cannot drive it. The whole scheme to hire leased employees from a PEO to run the entity seems to be at best window dressing, and more likely is (pick one: a facade, hocus-pocus, deception, dissimulation, funny business, pretense, an illusion...) I certainly would not want to be in a co-fiduciary role in any capacity that is associated with this arrangement.