Top heavy aggregation

[Guest jim williams]

In light of the new proposed regs, am I correct that a Safe harbor plan and a Nonsafe harbor plan sponsored by two companies of a controlled group do not have to be aggregated for top heavy determination?

[R. Butler]

Where do you see that? I have not studied the proposed regs. all that thoroughly, but I don't recall seeing that?

I have seen that where the proposed regs. require that plans aggregated for 410(b) use the same testing method.

[Tom Poje]

in a round about way? I may never have the time to look at those regs, I think I read 2 pages so far. I have some print offs of reviews and the notes I have say

'for example, a plan that satisifes the ADP test by testing may not be aggregated with a plan that uses the ADP safe harbor'

In other words, you cant aggregate plans with different testing methodologies.

And if you can't aggregate for testing, then I guess you can't aggregate for top-heavy?

[R. Butler]

Thats not necessarily true. You may have to aggregate for top-heavy even if the plan isn't aggregated for coverage (i.e. where each plan has a key employee.)

And really from the quote I get the impression that Mr. Williams thinks this is a positive

a controlled group do not have to be aggregated

, but really isn't this a more restrictive rule? You still may have to aggregate to pass testing and under the reg. if you aggregate for coverage you also have to use the same ADP/ACP testing method.

[Guest jim williams]

My question relates to the single testing method you mentioned. The proposed regs prohibit an employer from aggregating plans for 410(B) and ADP/ACP testing purposes that have inconsistent testing methods. A Safe harbor plan and a Nonsafe harbor plan would be considered to have inconsistent testing methods. Does this prohibition also apply when determining the required aggregation group for top heavy determination?

In my scenario, a key employee is eligible to participate in both plans, although he only contributes to one of the plans.

[R. Butler]

My initial impression is that depending on your scenario, its possible that plans using separate testing methods will still be aggregated for top-heavy.

Are you aggregating for coverage? If no and you are only aggregating for top-heavy because each plan has a key employee, then I have not read anything that indicates you must use the same ADP/ACP testing method.

Again I haven't really studied these that closely, so I'm not saying its not there, I'm saying I haven't read it.

[Guest jim williams]

My objective is not having to aggregate the plans for top heavy because if tested separately both plans satisfy the requirements.

The Safe harbor plan, which is top heavy, receives the 3% nonelective contribution.

The nonSafe harbor plan, which has no key employees contributing, would not be considered top heavy.

If I have to aggregate, then the nonkey employees in the nonSafe harbor plan will be required to receive a top heavy minimum.

[R. Butler]

If each plan benefits a key employee, then they have to be aggregated for top-heavy.

[Tom Poje]

The Butler is correct, sounds like you are out of luck.

A plan can (or must) be aggregated for top heavy purposes even though it can't be aggregated for coverage

see 1.547 (2003 edition of ERISA Outline Book) I was unsure of that, but that is a pretty reliable source, aybe that is what mr williams is looking for - something in writing.

[R. Butler]

I was aware of something that Tom Poje was not!!!! My pension career is now complete. I am going to retire and rest on my laurels.

[Tom Poje]

Ha! I imagine you could easily show me up at the ASPA conference. You'd be surprised how much I keep 'discovering' along the way. I have to give a talk, and throwing together the notes and reg cites has been a real trip!