Two Plans and Two Top Heavy Vesting Schedules

[Guest Holly Foster]

Company has two plans that cover all the same people except the 401(k) plan excludes "Associates" and the Profit Sharing plan does not. The 401(k) Plan has immediate vesting for all contributions. The profit sharing plan has a 3 year cliff vesting schedule. The plans are required to be aggregated and are top heavy. Plan documents indicate the top heavy minimum should be made to each plan. Everyone except assocaites has an account in the profit sharing plan and their top heavy minimum is deposited in the profit sharing plan. A rich enough profit sharing contribution more than covers the top heavy minimum contribution on most employees. Can the associates get their top heavy minimum deposited in the 401(k) plan and be subject to full vesting and everyone else who is in the profit sharing plan get their top heavy minimum in the profit sharing plan and have to wait 3 years for vesting? If so does the plans need to be tested for benefits, rights and features?

[J Simmons]

Plan documents indicate the top heavy minimum should be made to each plan.

Check the wording to make sure the 3% is not required to each plan for those eligible for both plans, totaling 6% between the two plans for those eligible for both.

Can the associates get their top heavy minimum deposited in the 401(k) plan and be subject to full vesting and everyone else who is in the profit sharing plan get their top heavy minimum in the profit sharing plan and have to wait 3 years for vesting?

Yes.

If so does the plans need to be tested for benefits, rights and features?

Yes.

[Guest Holly Foster]

Is there any Code section that covers this so I can let the client know?