Gateway and 2 plans

[Guest Beachgirl]

We have a multiple employer plan and one of the adopting employers is revoking their participation in the MEP as of 10/31/06 (under the MEP the plan is a 3% safe harbor 401(k) with comparability profit sharing) (has last day rule for the profit sharing portion). This employer is going to set up an individual plan with us; plan will be effective 1/1/06 with the salary deferral provisions effective 11/1/06. Of course, the individual plan will not be safe harbor. The document that we will be using for the individual plan does not have specific language stating that if the same employer has 2 plans that the contributions in one plan can or will be used in the second plan to meet the minimum gateway requirements. The language is:

". . . However, the amount of the Gateway Contribution allocated to each Non-Highly Compensated Participant (as described in subsection (i) above) shall be reduced by the amount of any Non-Elective Contribution or Qualified Non-Elective Contribution (other than a Qualified Non-Elective Contribution which is used to satisfy the "Actual Deferral Percentage" test or the "Actual Contribution Percentage" test) or Forfeiture allocated for the same Plan Year to such Participant. For purposes of subsection (ii), "415 Compensation" shall be recognized for the Plan Year.

We would like to read this section as allowing us to use the 3% safe harbor made in the MEP to count toward satisfying the minimum allocation gateway in the individual plan since it doesn't specifically say only contributions in THIS plan can be used for the gateway. Any opinions would be appreciated!

[Mike Preston]

It might be helpful to look at the PS document that this provider has. If it has similar language, then it is obvious the drafter meant to include all plans.

A secondary option is to go with a document provider that doesn't specify gateway rules in the document at all. What purpose does it serve?