Who's Required to Receive Minimum Alloc. Gateway

[Guest dash]

Client maintains a combination cross-tested p/s and 401k plan. Prior to 2002, participants who either were not employed at year end or did not work 1,000 during the plan year were not eligible to receive any p/s (or forfeiture) allocation. All participants were, of course, eligible to make 401k deferrals.

Can these p/s allocation requirements be retained for 2002 and beyond in light of the new minimum allocation gateway requirement? In other words, can the plan continue to be cross-tested even though some NHCEs do not receive the gateway minimum (i.e., those who terminated or worked less than 1,000 hrs)?

The preamble to the gateway regs seems to provide that individuals who do not receive any benefit (i.e., no allocation of p/s or forfeitures) need not be given the gateway minimum. Yes/No? Does the fact that these NHCEs can make 404k deferrals and receive a match impact this result?

Thanks.

[Tom Poje]

the only thing that matters is if an NHCE receives a nonelective contribution (profit sharing, forfeiture, QNEC or SNEC) if so, and the plan is cross tested, then they must be bumped up to the gateway minimum. It does not matter whether they are active or terminated. if they get a little, then they get more.

The exception, of course, would be a plan with broadly available bands, such as an age weighted plan.