Top heavy minimum with frozen DB + 401(k)

[Guest Judy S]

We have a situation that I'm not sure how to handle. The client has a DB plan that will be frozen and a 401(k) plan with deferrals only-no match, no profit sharing. The plans cover the same employees, including 2 key employees. The 2 key employees are also the only 2 HCEs.

One of the key employees is receiving a life only annuity benefit from the DB plan, but continues to be employed. He has elected not to defer in the 401(k) plan, and, in fact, has no 401(k) plan balance. The other key employee is younger and is currently defering in the 401(k).

The plans are aggregated for top heavy determination and are top heavy.

Since EGTRRA, we no longer have to count service while the DB plan is frozen for top heavy purposes. If the plans are written to provide the top heavy minimum in the 401(k) plan, at the required lesser of 5% or the highest contribution rate for any key employee, and both of the key employees have elected to defer 0%, are we then required to provide a top heavy minimum in the DB, even though it is frozen?

If so, since the goal is to avoid providing the top heavy minimum, can we amend the 401(k) plan to make key employees ineligible, thus avoiding having to combine the plans for testing, and then provide the top heavy minimum, if necessary, in both plans? There would be no minimum in the 401(k), and participants in the frozen DB have already accrued their top heavy minimum when we don't have to count service while the plan is frozen.

We've gone around on this a bit in our office and would appreciate any comments.