Top Heavy/Gateway/Date of Entry

[jquazza]

A 401(k)/new comp PS has 1 YOS requirement for the K, 2 YOS for the PS, semi-annual entry dates. Plan defines compensation as date of entry compensation in each portion of the plan. Plan is top heavy. Favored group gets PS contribution >20%.

A new participant (A) enters the PS plan on 7/1/03, gets a 6% contribution based on comp from 7/1-12/31/03. Contribution is just over 3% of 415 comp.

Particpant B is in the 401(k), but not eligible for the PS, gets a top heavy minimum contribution boosted by gateway to 5% of 415 comp.

Do you agree that I don't have to boost A's contribution to meet Gateway because it is over 5% of his DOE Comp, but I do have to boost B's because his comp for the PS is $0?

[Mike Preston]

You didn't indicate whether B's entry is similarly 7/1/03. So, I will assume it was 1/1/03 or earlier.

Similarly, you didn't indicate whether the 401(k)/new comp PS are separate plans or whether they are contained within a single plan.

The answer to your inquiry is effectively "yes", but the technical answer is "no."

The contribution to A satisfies the Gateway requirement and therefore you needn't boost A's contribution above what it already is to meet the Gateway rules. I agree that you needn't boost A's contribution to 5% of 415 comp in order to meet Gateway.

What you have done for B is correct as far as the top-heavy minimum goes. And assuming the 401(k) PS Plan is a single plan, what you have done for B is correct as far as the Gateway goes (assuming the 5% threshold is what you need to satisfy - if the Gateway minimum is lower, say 4.667% of pay - then increasing B to 5% is not necessary). However, if the 401(k) and PS Plans are separate plans, unless the 401(k) plan's employer contributions are being aggregated with the PS Plan's employer contributions for purposes of 410(b) [don't laugh, it might happen] or the general test, there would be no need to increase B above the TH 3%.

[Earl]

Seems to me to be one plan and I would assume that B enters PS 1/1/04 or later and thus, if disaggregated into componant plans, B, as an otherwise excludible, could get just 3% if that componant passes coverage and non-disc. (exclude from gateway)

[Tom Poje]

otherwise excludable rule does not work with 2 year wait

see 410(b)(4)(B) -Requirements may be met separately with respect to excluded group. If employees not meeting the minimum age and service requirements of subsection (a)(1) (WITHOUT regrad to subparagraph (B) thereof)

subparagrapg B is the section that pertains to 2 year wait.

[Earl]

beautiful....