DB-DC TH min

[Guest lerieleech]

We have a client with a DB and DC plan. The th min is provided in the DC.

The plan is top-heavy. A non-key employee participates in both plans, and works over 1000 hours each year, but does not accrue a benefit in the DB (don't ask--- long story).

Does the aforementioned non-key ee get a TH min of 3% or 5% of comp?

[Guest Carol the Writer]

I would say the non-key gets 5%, but then I am super-conservative about matters like this.

[AndyH]

5% unless the mystery situation would justify 3%.

[Guest lerieleech]

Well, all that that mystery situation was is that originally the non-key ee was going to benefit in the DB plan and receive a much larger PS allocation-- large enough so that top-heavy wasn't on the front burner when the plan was set up. At the 11 5/6th hour (and this was in 2005), they decided they weren't going to benefit her in the DB, but wanted to reconsider in future years whether that would change. They also pulled the PS allocation way down, but still greater than the 5%, so it wasn't an issue at the time.

And yes, nondiscrimination passed...

[SoCalActuary]

Did you also have a gateway issue for 401a4?

[Guest lerieleech]

Did you also have a gateway issue for 401a4?

Good question.

Not in 2006. She is an HCE in 2006, but was an NHCE in 2005, and will again be an NHCE in 2007.

So in 2005, there was a gateway issue, as there will be in 2007.

[ak2ary]

If she is in an ineligible class in the DB plan, she is not entitled to a DB TH min; the only min she gets is the DC min...gateways aside

[Penman2006]

Gateway and combined plan nondiscrimination testing aside, if the employee in question only participates in the DC plan then that person only has to get the DC minimum of 3%. The 5% DC TH amount is if someone participates in both a DB and a DC plan and the TH min is provided in the DC plan.

[Mike Preston]

How does one participate in a plan, work more than 1000 hours and not accrue a benefit? I'm willing to listen to the long story.

[AndyH]

lerie could tell you, but then he/she'd have to shoot you.

[Mike Preston]

;-)

[Guest lerieleech]

How does one participate in a plan, work more than 1000 hours and not accrue a benefit? I'm willing to listen to the long story.

The short explanation is that their accrual rate, as specified in the document, is 0.

Of course, the natural question is why not just exclude them from participation? Without going into detail (and so I won't have to shoot you ), originally the company wanted her to benefit in the DB plan. At the last minute, they decided they didn't. Even at that point, their intent was still to give her a VERY generous profit sharing allocation. So, the issue of a TH min wasn't exactly something that was on the front burner at the time.