TH Minimum to New Keys

[austin3515]

We use the Corbel 401k EGTRRA prototype.

Got a person who became a 2% owner on 6/30/2009. He earned more than $150K in both 2008 and 2009. Client does not want to give the THM to the participant for the 2009 Plan Year. I know there are two schools of thought on whether or not he can be considered key for 2009 (a), consistent with TH Ratio determination, b) as of last day of applicable plan year).

Has anyone ever gone over this before, specifically with the corbel document?

[Tom Poje]

it is discussed a bit in the EOB, chapter 1, definition of key employee, part C 4

the general conclusion being the person is elibile for top heavy minimum, but in all fairness both arguments are presented.

[DMcGovern]

paragraph 4d of the same EOB section also provides that "The plan administrator is charged with following the terms of the plan and, where the terms are ambiguous, is usually charged with the responsibility for interpreting the document." It also goes on to say that since the IRS generally agrees with using the same testing period for both the top heavy determination AND identifying the non-key employees, most plan administrators tend to agree with this position. In your case, that would mean providing the top heavy contribution to this participant this year, not the following year. But it should be up to the plan administrator to decide and tell you how to handle it. Best to get that in writing from them.