Combined DB/DC plan

[Gary]

A combined plan passes non discrimination by means of cross testing.

The allocation rate fo rthe HCE is 5% in profit sharing plan and 40% in the DB plan.

Therefore, on a combined basis it would indicate that a gateway of 7.5% is required.

The eligiblity for the safe harbor 401k is 21 & 1.

The eligibility for the PS and DB plans is 21 & 2 (immediate 100% vesting upon entry).

Employees who have satisfied the 21 & 1 of course receive the 3% 401k non elective safe harbor.

The plans are combined to pass non discrimination.

For employees participating only in the 401k safe harbor (only 21 & 1), can their 3% safe harbor satisfy the gateway, sicne they only participate in DC plan where the HCE allocation is only 5%, or do these employees need to receive the total 7.5% gateway?

My feeling is that they should receive the 7.5% gateway, but curious to hear other views.

Thanks.

[Blinky the 3-eyed Fish]

7.5%

[John Feldt ERPA CPC QPA]

They must receive the gateway if they are getting any employer allocation.

By 40% in the DB plan, if you mean the HCE rate is 40%, then of course 7.5% is correct.

Under 1.401(a)(4)-9(b)(2)(v)(D)(1), depending on the age of your HCE, their compensation, and the benefit accrual, it is possible to have a gateway that is less than 7.50%.