top heavy status successor plan

[R. Butler]

I am drawing a blank.

The Co. AB plan covered employees of both Co. A & Co. B. Co. A & Co. B were part of a controlled group in 2005. No longer controlled in 2006. Co. B employees are spun off into the Co. B retirement plan. It is my understanding Co. B plan would be successor plan for ADP/ACP purposes, but is it the same for top heavy? Do I determine 2006 top heavy status for the Co. B plan by looking back to the 2005 results for Co. AB plan or this treated as a new plan & look to the end of the first plan year for Co. B plan? I really can't find any clear guidance.

Thanks in advance for any help.

[JanetM]

Reading the Nondiscrimination Answer book, Q 17:35 If the former entity terminated a plan, the distributions from the plan would be considered during the applicable determination period. [ Treas Reg §1.416-1, T-6, Ex 2]

This doesn't say spin-off but seems to me you would look back to former plan.

[Mike Preston]

I agree, as long as you are saying that the entire population to "look at" is that which is determined solely with respect to employment by B. I guess I would say that you pretend the AB plan covered two groups, the A group and the B group. Looking solely at the B group and going back as far as one needs to satisfy the TH calculations and key employee determination issues, determine whether the B plan is top-heavy for 2006.

In the case of employees that worked some time for A and some time for B there are issues that need to be resolved.

[R. Butler]

I agree, as long as you are saying that the entire population to "look at" is that which is determined solely with respect to employment by B. I guess I would say that you pretend the AB plan covered two groups, the A group and the B group. Looking solely at the B group and going back as far as one needs to satisfy the TH calculations and key employee determination issues, determine whether the B plan is top-heavy for 2006.

In the case of employees that worked some time for A and some time for B there are issues that need to be resolved.

O.K. I don't necessarily disagree. I need to reconcile that thinking with how we treat the ADP/ACP testing. Prior year testing method is used. It seems to me that since this is a successor plan, I'm going to run my ADP/ACP based on prior year numbers for Co. AB plan; I do not segregate out employees of Co. B in determining that prior year percentage. Why do I segregate out for top-heavy purposes, but not ADP/ACP purposes? Am I incorrect on my ADP/ACP thinking? Maybe I am right on ADP/ACP, but the answer is as simple as those rules I'm using only apply to ADP/ACP?