Leaderboard

The only way to avoid the THM (i.e., the only way to preserve the safe harbor status and top heavy exemption) currently is to terminate the plan, but that only works if it is a substantial business hardship. From the EOB the hardship rule is defined as follows: 2.c.2)a) Definition of business hardship. IRC §412(c)(2) lists the following factors as relevant to a determination of business hardship: (1) the employer is operating at an economic loss, (2) there is substantial unemployment or underemployment in the trade or business and in the industry concerned, and (3) the sales and profits of the industry concerned are depressed or declining. I spent an hour and a half reading up on these rules this morning. I advise everyone to read the section of the EOB that goes over this.

To be more clear, you only take into account involutnatry terminations when determining if there was a partial term. Then you fully vest anyone who terminates for any reason (thats the dumb part; the guy who quit for another job gets a windfall). And because they have already exceeded the 20% threshhold, in this case by a wide margin, there is no way it could decrease from there.

You got it! It is a discretionary employer contribution and the plan document has not direct connection via written provisions to the external reason (student loan payment) for the employer contribution.