Top heavy plan & minimum gateway requirement

[Guest M. Martin]

Cross-tested plan allows for immediate entry into the 401(k) portion and 1 year of service (1,000 hours) for the profit sharing. An employee has worked for the company for at least 5 years but has never satsified the hour requirement to become eligible for the employer contributions.

The plan is top heavy however the minimum gateway being allocated to the eligible participants is 4.50%

Should this participant receive a top heavy minimum of 3% or the higher gateway minimum?

Thank you

[jaemmons]

Top heavy contributions are aggregated with all "non-elective" contributions for coverage purposes. If the lowest age/service condition for the plan is less than one year, you are allowed to permissively disaggregate the statutory exclusions, when determining gateway minimums. Therefore, only those non-keys (who are non-highly compensated employees) would receive the 4.5%. Of course, this is conditional on your plan document containing language for these "top-off" contributions.