Employer maintains an individually designed CB plan started in 2002 and a 401(k) plan with an Er match of up to 6% of comp. CB plan has annual comp. credit schedule which increases with age to 47.75% of comp. at age 64 and above. Recently the status change to former key of certain Eees was not entered in plan records. TH status of plans not changed by exclusion of accounts of former keys. FKs continue to be be credited with comp credit each year under CB plan, have not been contributing to 401(k), so no match. Plans are required to be tested together and are top-heavy. Each plan contains provision in case non-key Eee covered by both plans in TH year. 401(k) plan provides that provision in CB plan controls. CB plan provides, in part, such NKEee shall receive an allocation (including matching contributions) under 401(k) plan "equal to 5% of comp for TH year (or such lesser amount as is permitted by applicable regulations to take into account benefits earned under this plan)". (emphasis supplied.) (This provision has been in CB plan from initial adoption and five DL issuances, with latest DL issued this year. QUESTIONS:(1) May the "offset" to the 5% amount be relied upon? (2) If so, to what extent? (Each affected FK accrues a substantial percentage comp credit in CB plan each year and has already accrued CB plan benefit greater than 20% of FAP. (3) May the 5% be offset completely by the greater than 20% benefit already accrued and the greater than 40% annual comp credit under the CB plan? { Regs.at M-12 recognize that IRC 416(f) precludes, in the case of Eees covered under both DB and DC plans, either required duplication or inappropriate omission.)
