Gateway rule

[Guest Napili]

Emoloyer sponsors a 401k plan. The plan provides match. It does not provide any other employer contribution. The plan covers all employees meeting the 21/1 requirements.

The employer wants to give more money to HCEs. Therefore, the employer wants set up a separate 401a plan, providing an employer contribution. The plan will only cover HCEs. He does not want to give the min. gateway to the NHCEs.

Is this doable? Under the minimum gateway rule, are all plans of the employer aggregated?

Even if there was not a min. gateway issue, I assume all plans are conbined for 401a4 testing?

Comments please.

[g8r]

This is the ultimate dream for many small employers. If you find a way to pull this one off, you'll be able to retire.

You can't do what you want. Without going on into detail, you must first pass 410(b). Since the second plan only covers HCEs, you will have to combine it with the 401(k) plan to pass coverage. When you combine plans for 410(b), you must combine them for 401(a)(4). The NHCEs have no non-elective contribution, therefore you must give them the gateway, or more if needed to pass nondiscrimination.

[Tom Poje]

actually, as stated, the NHCEs received no non-elective contributions. as such they are not entitled to the gateway. (see preamble, which says if individual does not benefit under the [401(a)(4)] plan he need not be given the minimum required allocation under the gateway) Thus you still have solved nothing, you fail coverage. the only way to pass coverage is to provide the NHCEs with some type of non elective, and once you do that, you have to give them at least the gateway, which is basically what g8r has said.