Intergrated plan with matching contribution

[Chippy]

I have a plan that is intergated with social security for the profit sharing contribution. They also make a matching contribution that is 50% up to 6% of comp. The plan is top heavy. For 2007 the profit sharing contribution is 3.08% of compensation. I know how to allocate the contribution if the plan is top heavy, 3% to all and for the remaining allocated on the excess comp. What is confusing me is the match and the top heavy minimum. If I allocate the profit sharing contribution prorata on comp plus excess comp (as if not top heavy) and then add the match, everyone but one receives at least 3% of comp. I guess my question is do I ignore the match when it comes to allocating the profit sharing contribution and everyone would receive the top heavy minimum with the profit sharing. I hope that isn't too confusing.

[Tom Poje]

I guess the first question is whether or not match can be used to satisfy top heavy, which could result in some odd looking allocations.

if someone received 2% match, then they would only need 1% profit sharing to satisfy the minimum.

[Mike Preston]

What does the document say?

[Chippy]

What does the document say?

The document is a Corbel Standardized Prototype. This is their only Plan. The p/s contribution is the standard intergration formula. I don't see in the document where it addresses if the match can be used to satisfy the top heavy minimum.

[Tom Poje]

I doubt the main document addresses the match in regards to top heavy. I believe you would find that in one of the amendments - I don't recall if it is in the EGTRRA amendment. or it could be it is only described if it is not used for top heavy.

[Chippy]

I doubt the main document addresses the match in regards to top heavy. I believe you would find that in one of the amendments - I don't recall if it is in the EGTRRA amendment. or it could be it is only described if it is not used for top heavy.

The EGTRRA amendment does say that matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements.

so, how does the intergated profit sharing contribution of 3.08% of comp. get allocated? Do I allocated as pro rata on comp plus excess or is it allocated as a top heavy plan without match is allocated? Am I making this harder that it is? It's been a long year so far.

[Bill Presson]

I doubt the main document addresses the match in regards to top heavy. I believe you would find that in one of the amendments - I don't recall if it is in the EGTRRA amendment. or it could be it is only described if it is not used for top heavy.

The EGTRRA amendment does say that matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements.

so, how does the intergated profit sharing contribution of 3.08% of comp. get allocated? Do I allocated as pro rata on comp plus excess or is it allocated as a top heavy plan without match is allocated? Am I making this harder that it is? It's been a long year so far.

I would allocate it without taking into account the match or any top heavy requirements. Then test it to see if it satisfies top heavy (while counting the match). But you can't use the match to satisfy any of the permitted disparity requirements.

[Chippy]

Just to be sure I understand. I will allocate the intergrated profit sharing contribution as though the plan is not top heavy. Then test the plan to make sure everyone has received the top heavy minimum between the profit sharing and the matching contributions? There is one person that did not receive the minimum, she did not defer and did not receive a match. So I will then post an additional contribution to bring her to the 3%?

[Tom Poje]

before saying yes or no, it was unclear from the initial question just what was going on.

you said the profit sharing was going to be 3.08% of compensation but then that the plan was also integrated and was top heavy. the 3.08% is an odd amount - or at least I would consider it an unusual amount. or are you saying the employer contributed, lets say $50,000 and it turns out that it is 3.08% of pay?

[Chippy]

yes, the employer contributed 100,000 which came to 3.08% of eligible comp.

[Tom Poje]

my logic says step 1 would be to first allocate the top heavy to ees who fail the hours requirement, and subtract that amount from the 100,000 then allocate the remainder to all eligible. hopefully the software you use can handle that. hopefully the remaining amount would be sufficient to cover at least 3% (and therefore you wouldn't use match to help satisfy top heavy)

[Chippy]

It's a standardized plan, so all active receive the profit sharing. I thought I should allocate the intergrated profit sharing contribution as though the plan is top heavy. 1st step, 3% to everyone, 2nd step 3% on excess, but since there isn't enough to fully complete that step, it would just be the remaining $$ to those with excess comp. What is throwing me off is the match. Do I just ignore the match when allocating the p/s contribution? I"m checking someone's work and they allocated the p/s contr. as though the plan was not top heavy, pro rata on comp plus excess. I would not have done it this way and I just wanted to check to see which was the correct way. thanks for your help.