terminated employee

[Gary]

An employee termianted in 2012 with over 1000 hours in 2012

the company sponsors a DB plan and a 401k plan and combines for testing.

the employee will earn an accrual in DB plan for 2012 since over 1000 hours

401k/PS plan requires 1000 hours and last day employment so employee is not entitled to an allocation in PS plan for 2012.

The combined plan s cross tested and requires gateway of 7.5%.

It is cleaner to meet gateway in PS plan.

Since employee is benefiting in the combined plan format can PS plan simply contribute gateway in PS plan?

Or does PS plan need an amendment prior to 12/31/12 providing for an allocation to this terminated EE?

Now how would above situation change if it were a non elective safe harbor 401k plan? does this allow for the gateway in PS plan?

It seems whether it is a DB accrual or 401k safe harbor the employee is benefiting, but perhaps where employee benefits dictates where gateway can be provided.

[John Feldt ERPA CPC QPA]

If the gateway requirement is triggered, the gateway does not have a last day requirement nor a 1000 hour requirement. Does the DC plan say that it will provide the top heavy minimum and is it top heavy? If so, you may have a trigger there (look at the plan document however).

Also, you may want to look at 1.401(a)(4)-9(b)(2)(v)(D)(3), which essentially allows the full DC gateway to be offset by the average equivalent normal allocation rate of all the NHCEs benefitting in the plan.

If the DC plan had each person in their own rate class, and no allocation conditions, you would have more flexibility here.

If the DC plan has a 3% safe harbor, that would trigger the gateway.

[Gary]

all great points.

the plan is top heavy but she didnt work to last day.

lets assume no safe harbor.

so the question boils down to:

can DC plan provide the gateway (with no amendment) if the participant does not meet any of the criteria for an allocation. Meaning, no safe harbor, no profit sharing, no top heavy, but yet gateway required?

i presume plan can be amended before end of 2012 and provide allocation for this one termnated employee?

yes, i realize gateway can be offset by DB equivalent allocation.