401(k) Profit Sharing Plan & ESOP Top Heavy Contributions

[Jilliandiz]

A company has both a 401(k) Profit Sharing Plan (employer discretionary contributions) and an ESOP Plan. In the 401(k) plan, its is cross-tested and the employer deposited money up to 16% to the HCEs during the year, therefore I would assume to pass gateway the NHCE's would have to receive atleast 5.57% employer contributions. However, in the ESOP plan the NHCEs all received a 4% contribution, can that 4% be counted towards the 5.57% that is assumed to be needed to satify the 401(k) gateway?

Can you satisfy the requirements in the ESOP Plan to satisfy the 401(k) plan top heavy or gateway contributions? There is nothing stated in the documents regarding this question.

Thanks.

And No, I was not the TPA before now!

[Tom Poje]

1.410(b)-7c2 says you have to disagregate the ESOP from the non ESOP in coverage testing.

not even a choice.

therefore you have to disagregate for a(4) testing.

Because of that, I don't see how the ESOP could count toward the gateway minimum.

but that is my logic, and I could be way off.

I would think the ESOP could satisfy top heavy, but it would become moot if you have to provide a gateway under the other plan anyway.

If the HCEs received 16% in the cross tested plan, then the NHCEs must receive a minimum of the lesser of 1/3 of 16% (5.33%) or 5%.

Thus you could give them 5% then try testing