Top heavy minimum with frozen DB + 401(k)

[Guest Judy S]

I posted this topic in the general retirement plans area and have received no replies. Thought I might get more readers here. . .

We have a client with 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), at the required lesser of 5% or the highest contribution rate for any key employee, and both 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, and would we then have to count years when the DB plan is frozen since otherwise, none of the nonkey would accrue additional benefits?

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 none in the DB since non-key employees have already accrued the required top heavy minimum.

Any comments would be appreciated.