Top Heavy requirement

[Gary]

A company sponsors a profit sharing plan and a defined benefit plan.

The plans are a required aggregation group and the combined plans are top heavy thus making the PS plan TH and the DB plan TH.

Ordinarily under 416 if an employee participates in one of the TH plans he receives that plan's TH accrual/allocation and if he participates in both plans he receives the 5% PS plan allocation.

The question is:

If the plans are part of required aggregation group and an employee only participates in the PS plan should such employee receive:

3% since only in PS plan

or 5% since the two plans are aggregated for testing?

Thanks.

[SoCalActuary]

TH aggregation is not the same as 401(a)(4) aggregation.

The PS only needs 3% TH for those who don't participate in the DB plan.

Sometimes, this is complicated over last-day requirements in PS plans and 1,000 hour requirements in DB plans.

If you are aggregating the two plans for a4 testing, then you also get to add gateway issues.

[AndyH]

"Ordinarily under 416 if an employee participates in one of the TH plans he receives that plan's TH accrual/allocation and if he participates in both plans he receives the 5% PS plan allocation."

I don't think there is any such "ordinary". It depends.

If the DB provides the 2% minimum under the formula, use that. If you know the PS will provide 5% anyways (due to a gateway requirement for example), use that. If some are in one plan and others in the other plan, you might need conditional language.

But the language needs to be in the documents whatever the best design is determined to be.