Top Heavy Cross Tested Plan - What's the Allocation?

[Guest ChopperPilot]

Based upon the following details, what is the EE's allocation?

An EE's DOH = 06/01/03. Their compensation from 06/01/03 - 12/31/03 = $12,400. The plan has a 90-day service requirement with quarterly plan entry dates. Therefore, the EE is eligible to join the plan on 10/01/03. The EE's compensation from 10/01/03 - 12/31/03 = $5,400. The plan is top heavy.

The document defines Compensation to "include only Compensation while the Employee is an Eligible Employee".

The contribution allocation for this class of EE is 5.5%: for the owner class it is 15%.

My concern is that the normal allocation of $297 (5,400 x 5.5%) is less than the top heavy allocation of $372 (12,400 x 3.0%).

Is my concern valid? What's the correct allocation?

[Mike Preston]

Your concern is valid.

[Archimage]

Yep, you have to give him the TH minimum.

[Guest ChopperPilot]

This prompts another question. Confirming the EEs should receive the 3% top heavy minimum, should a 3rd class be established to test these employees? Recall this is a cross tested plan. Currently the document provides for two classes. Class 1 is the owners and class 2 is the non-owners. Or instead should they be tested as class 2 with the understanding their allocations will be increased to ensure they receive the 3% TH minimum.

Thanx again.

[Archimage]

Your plan document is required to state how top heavy requirements are to be made. This should already been written in your document. I don't think you will have to change anything.