Avoiding gateway

[Brenda Wren]

Now that we've all merged our tandem plans into one and made our MPP plans go away, I'm wondering if we need them back! We have many 401(k)cross-test plans that were designed to exclude a group of employees (i.e. dental hygienists or associate attorneys). Now we are being required to fund not only the 3% contribution top heavy or safe harbor contribution, but possibly an additional 2% to satisfy gateway. I'm thinking that if we placed the SH or THM contributions in a separate plan, we could get around gateway. Am I missing something? Of course, the costs of establishing a separate plan and maintaining it might make the point moot, but wish I had thought of it before we terminated our MPP's! Any thoughts?

[AndyH]

If you are excluding a group of people by class, why are they receiving top heavy or gateway contributions?

[Brenda Wren]

I guess I shouldn't have said "exclude". In these plan designs, client wanted to allow these higher paid employees to participate in salary deferrals, and was also willing to do 3%. Now I'm finding that if the plan is top heavy or a safe harbor plan, they have to give them 5%. So then I thought if I had kept the old MPP, the plan where I was making the safe harbor or the top heavy contributions in the past, I could have remained at the 3% contribution requirement and avoided the gateway requirement. Would you agree?

[Tom Poje]

yes, mainly because I have a similar situation, except there are 2 profit sharing plans - the one excludes associates, the other includes associates only

[AndyH]

Right. That's the kind of setup you need. You must not need to aggregate for 401(a)(4) or 410(b) I would think. Could be tricky.