Money Purchase plan - part of DB/DC combo?

[John Feldt ERPA CPC QPA]

We found a prospect with a money purchase plan (10% of pay). They want to add a DB plan, provide large HCE benefits and small NHCE benefits in the DB by cross-testing the DB with the money purchase plan to pass 401(a)(4).

We've only used volume submitter cross-tested Profit Sharing plans with gateway language for this thus far. Is it allowable to use a money purchase plan for this? If so, is extra plan language needed to allow it (such as gateway language)?

[Mike Preston]

Yes, you can use a MP plan. If it is 10% then it will satisfy gateway. Other questions?

[Tom Poje]

Assuming of course that top heavy (if needed) is provided in the money purchase plan.

[John Feldt ERPA CPC QPA]

Would the MP plan be required to add gateway language? I know the gateway amount itself is satisfied, I want to make sure the form of the plan is also handled. Since the MP plan requires 1,000 hours, I think the gateway language needs to be added?

[Tom Poje]

I'm not sure there is a requirement for a plan to have gateway language. Now, without it you can't simply bump someone up to the required amount, so you would probably want the language in there.

For example, suppose the DB/DC combo is top heavy. Then someone who is active with less than 1000 hours gets the top heavy min of 5%. if the gateway was 7.5%, then without gateway language you would have to put in a corrective amendment to increase the individual to 7.5%.