Eligibility for top heavy minimum

[Guest Tbrown]

I wanted to get everyone's opinion on something (even though it isn't likely to come up very often) to see how important it might be to them. I was doing some research on who is eligible to receive a top heavy minimum contribution and how Relius handles it as it compares to the FDP and Corbel plan documents, the regulations, etc. According to what I have read, there are 2 interpretations. The prevailing view is that the minimum contribution must go to everyone who is a not a key employee for the year that contains the determination date (the last day of the prior plan year). The opposing view (and more logical in my opinion) is that it goes to all non-keys in the year in which it is to be allocated. According to the ERISA Outline Book, either appears to be fine pending additional guidance. Relius takes the opposing view point not the prevailing. However, both the FDP and Corbel plan document clearly state that it goes to non-keys for the year that contains the Determination Date (the prevailing view). This was confirmed with one of corbel reps. And the language they use is word for word from the IRS' prototype language so it is probably the same way in most documents.

Does anyone see this as a major problem for them? It would most likely occur when someone buys into a business and becomes an owner. In the first plan year that they were an owner, Relius would not give them a top heavy, but the plan document would call for one (which doesn't seem logical to me, but seems to be the way the IRS is leaning).

Hopefully I explained it well enough.

I would really appreciate your thoughts on it.

Tim

[Guest DottleC2]

Thanks for posting this question - I think it's a very important issue, and I've found that there are some particularly sticky points in Relius. (There are some monumental differences in version 8 and these differences also affect how plan specs are integrated into reports - so the following may not be helpful for people running prior versions.)

-In a nutshell, I prefer the prevailing view - but Relius isn't letting me go that route. Not sure what to do.

-The allocation (in Relius) is decided by looking at the historical for the year in which the valuation is run - this doesn't mean that it is using the opposing view - yet. It means that it uses this field in deciding whether or not to allocate a top h min at all.

- Here's where it again gets critical; Once top heavy, the top H min box opens for display at the transaction level. In my hypothetical test, I made the Plan top heavy for the period 01/01/2002 to 12/31/2002. The '02 allocation was not given to my New Key Employee. Now it's adopting the Opposing view... but what if I want/adopt the prevailing view? Not sure what to do.

-At the transaction level, I had to untick determine HCE/Key in order for my new Key (officer) to be given an allocation. This can't be right.

-In plan specs, I ticked guarantee th mins, keys excluded at the TH/ADP screen.

-The current Stock of Conribution Analysis reports will want to use plan year compensation - I noticed that this may need alteration if you have an allocation that is based on say, Comp from entry (which does happen sometimes).

-The standard allocation report is one to peruse to check things out.

-HCE works fine, as long as manual overrides for takeover plans are done correctly. (This doesn't have anything to do with top heavy but it does seem like the two processes should work the same.)

-Takeover plans have to have the status set manually at the participant level regards the prior year field.

-The '03 Valuation drop-down box for [prior year key status]* has a different selection. Fine with this. *Meaning the field, not the determination.

-The test I ran used a six month elig req't and the new key was hired on 1/1/02. I couldn't get it to allocate to the 'New Key'. The [Key this year] field was updated by eligibility - despite my having set it to Not.

Regards,

Bill