Age weighted formula & TH

[Guest algeis]

I have a PS plan that has an age weighted formula, the document says that you have to allocate top heavy minimums ONLY to non-keys. Does this mean that a client who only wants to allocate 3% PS to cover TH, he could not just do a straight 3% across the board? Either he would have to allocate 3% to non-keys only and keys would receive 0%, or would he have to allocate more than 3% so that the keys could also get the TH min? No way to allocate 3% TH to ALL participants?

[pmacduff]

FWIW - I can't really remember back on any of the age weighted formula plans (ours have all changed to cross-tested) but I would think it's basically the same premise...per the plan doc if the Employer's contribution is not sufficient to utilize the cross testing allocation then the profit share is simply allocated on the old fashioned comp-to-comp basis. In other words, yes you could allocate the 3% across the board.

I think that your Plan Doc should address that somewhere in the formula, allocation or top heavy verbage?

[Bird]

You have to follow the terms of the document. What you described says to me that you could NOT just allocate 3% across the board.

[Tom Poje]

maybe yes or no. I think mathenatically it would work if the key ee is the oldest particpant.

In an age weighted formula, the oldest person should receive the largest % and everyone receives less.

so if I allocate the oldest key ee 3%, since the plan is top heavy, all non keys have to receive 3% as well.

if there are other key ees, they would receive a smaller amount through the formula.

if I give the oldest key slightly more than 3%, then depending on how things work out the other keys would receive more, unless a non key was close in age to the oldest key the non keys would still only receive 3%.

if non keys are older then they would receive more than 3%.

In fact, the question can the non keys receive 3% and the keys 0% makes no sense unless this is a 401k, because at that point the top-heavy minimum is 0% since the keys received 0%.

[Tom Poje]

should have added:

if running on Relius, you would want top heavy method to be top heavy skim.

when you run a $ amount the system will 'skim' off from the total contribution and keep providing top heavy as needed.

........

the very first plan I ever ran in my life on the old Pentabs system got stuck in a loop. it was the first year of the plan, so the allocation was run. system finished and said, oh wait, the allocation makes it top heavy, give the non keys 3%. so it gave them 3% first, got finsihed and said, oh, my mistake, its not top heavy, and it kept running and running and running going back and forth. talk about a bug in the programming!