Can Minimum Gateway be avoided for an allocation group whose allocation is 0% (not benefitting)?

[Guest PLHart]

A controlled group of 3 companies wishes to establish a separate allocation group for the employees of each company so they may make varying levels of profit sharing allocations to each based upon the varying levels of profitability for each company. The plan also has a 401(k) feature benefitting employees of all companies.

If the employer decides that one company (or allocation group) will get 0% in a given year (and assuming the plan passes all other coverage and non-discrimination tests) are the participants in that allocation group still subject to the minimum gateway requirement (thus causing an unintentional contribution), or not since those employees would not be "benefitting" in that year under the 401(a) component of the plan.

Plan is NOT top heavy.

Any help appreciated.

[Archimage]

It is possible that you could test these separate groups as component plans. If each would pass coverage on its own then your plan would be viewed as a safe harbor design in regards to testing under 401(a)(4) and you would not have to worry about minimum gateway allocations.

[Tom Poje]

for gateway minimum, if someone gets 0 non elective they are not benefitting and so no gateway is required.

but I am

not sure I understand the question.

3 companies each has its own formula

for example company A 4%

Company B 2%

Company C 0 %

Since it is controlled group, plans could be tested unaggregated (e.g. look at company A and treat all ees of B and C who meet eligibility of A as includable and not benefiting. If each plan can pass, then assuming safe harbor formula no additional testing need.

If plans have to be aggregated to pass coverage testing, they still could be tested for a(4) on an allocation basis then no gateway would be needed if they pass.

[Blinky the 3-eyed Fish]

Isn't there just one plan? I see no mention of plans in the original post. Unless you are considering component plans.

[Guest PLHart]

What if we complicate matters by adding several other allocation groups such that:

Group 1: President of Company A

Group 2: VP XYZ Group Company A

Group 3: All other Eligible Employees of Company A not listed above

Group 4: All Eligible Employees of Company B

Group 5: All Eligible Employees of Company C

and go back to original question: If directors elect to contribute 0% to company C will employees of company C be subject o minimum gateway or not?

I believe your response to this specific question would be the same. however, how would this affect the othe suggestions made above?(i.e component plans, etc.)

[Archimage]

By separating your HCEs into a different group (assuming you are giving them a different allocation rate than the rest of A) you do not have uniform allocation rate for that group. Thus you would have to cross-test the plan.

Your plan document would also have to be written to separate your HCEs into different groups for allocation purposes and I assume this is not your current situation.