Top Heavy for DC and DB Offset Plan

[Blinky the 3-eyed Fish]

A DB plan's benefit is offset by the equivalent benefit from DC nonelective contributions. The top heavy minimums are provided in the DC plan rather than the DB. However, when someone works 1,000 hours but terminates before the last day, then they meet the DB but don't meet the DC requirement. In that case the TH is provided in the DB plan, but the same offset provisions apply.

Often the case is that when a person has the 1,000 hours and terminates during the year is that they get the 2% DB accrual, but the value of their DC balance is enough to completely offset this accrual and those earned in prior years in the DB, leaving their net benefit at $0 in the DB.

So what ends up happening is that they get no true benefit in the year they terminate (no DC and no increase in net DB). I see the logic in it because of how the TH rules work in DB plans but I just want to see if anyone disagrees with this result.

One other note - this person would be considered benefiting for gateway purposes and need to receive that minimum amount, agreed?

[david rigby]

I'm confused. Are you offsetting the value of one DB 2% accrual by the entire balance in the DC plan?

[Blinky the 3-eyed Fish]

Effectively yes, but the reality is that the participant earned also a gross .5% in prior DB years. But his years of participation in the DB are less than in the DC.