401(k) + P/S/P Cross-testing

[Guest Lisha]

We have a plan with a 401(k) feature with a one-year eligibility and a P/S/P feature with a 2-year eligibility. Does such a plan need a gateway?

Thank you

[Belgarath]

The mere fact that there is a combined 401(k)/PS plan does not necessarily require gateway. It is the PS allocation method itself which will either require gateway or not.

[Tom Poje]

if plan is top heavy, then you would have to provide the minimums to those who are eligible to defer and employed on the last day, even though they are not eligible for the profit sharing... was that what you were intending to ask?

[Guest Lisha]

That's it exactly. Thank you. I have alot to learn, and I appreciate the help.

An unrelated question is this: Would it make more sense to have two separate plans, one for the 401(k) and a separate one for the P/S/P? Would there be any advantage to that, administratively?

[Tom Poje]

I don't think setting up2 plans accomplishes anything, you cant get around the top heavy issue.

this raises questions as to how the document reads.

with a 2 year wait, ees are 100% vested in the profit sharing $.

however, the top heavy $ could be subject to vesting. not sure if that would even be addressed.

in addition,

If a profit sharing contribution is made (e.g. 5%) you end up with some people at 5% and those with less than 2 years at 3% (top heavy minimum)

for sched T all benefit, but now you need to test treating top heavy only ees as includable and not benefiting. if that fails, you have to test for non discrimination.