ER wants to set up a Top Hat plan for a handful of highly skilled hourly people

[katieinny]

The company employs about 80 people, 5 of whom are highly skilled, well paid (but not HCEs), hourly employees. Because of their unique skill set they are often approached by competitors trying to lure them away. The employer would like to set up a Top Hat plan for these guys, but the "select group of management or HCE" language has us wondering. From the reading I've done, it seems that there is some room for interpretation about the rigidity of that language. We would be interested in hearing the thoughts of our peers.

[Guest PHLester]

The company employs about 80 people, 5 of whom are highly skilled, well paid (but not HCEs), hourly employees. Because of their unique skill set they are often approached by competitors trying to lure them away. The employer would like to set up a Top Hat plan for these guys, but the "select group of management or HCE" language has us wondering. From the reading I've done, it seems that there is some room for interpretation about the rigidity of that language. We would be interested in hearing the thoughts of our peers.

Katie: You are correct. There is room. Example: back in Y2K, I had several clients concerned "the kids in IT are holding the world together..." and while they were making $50K, they needed them to stick around. In on instance, they had about 2000 EEs, 70 eligible participants (everyone making in excess of $120K). So, they were not eligible. Amended the plan to state: an eligible participant were those "named/identified by the company president..." or compensation committee as the case may be. Hope this helps. Having said this... for a small company/small plan, this can be expensive. He may want to consider something else.

[jpod]

If they are all and likely to remain NHCEs, or at least predominately NHCEs so as to readily satisfy 410(b) coverage testing, why not a qualified plan for them? (And, any attempt to shoe-horn them into "top hat" status is very much pushing the envelope.)

[QDROphile]

PHLester:

What makes you think what you did was compliant with the law? "Select group" is not enough by itself. How does katieinny get to the "management" or "highly compensated" components of the definition?

[four01kman]

Isn't it possible to simply enter into employment agreements with these people, spelling out whatever special deal is desired?

[QDROphile]

Separate employment agreements will not avioid the problem. Even a one-off arrangement can be a pension plan, and this employer would have a collection of them. By themselves or viewed together, they don't escape. We know nothing of the intended design, but atomizing does not change the issues.

[Mark Whitelaw]

Do the individual's earn $50,000+ and perform gray-collar or white-collar roles ... not blue-collar roles? If so, you can do The STAR Plan featuring ILI (institutional life insurance) with a REBA (restricted employee bonus arrangement) to provide whatever vesting the employer wants on its contributions. Employee ends up with greater personal value from day one (ILI cash surrender values start at 100% of contribution plus minimal death benefit protection) and the employer has none of the issues raised above.

[david rigby]

If they are all and likely to remain NHCEs, or at least predominately NHCEs so as to readily satisfy 410(b) coverage testing, why not a qualified plan for them? (And, any attempt to shoe-horn them into "top hat" status is very much pushing the envelope.)

Ditto. Why make it more complex than necessary?

Special class of NHCEs that get an extra PS contribution?