Combined Plan Top Heavy

[stbennet]

Considering a cross tested 401k/CB plan th at is Top-Heavy.

A participant works 1000 hours but isn't employed on the last day of the plan year. Let's say the participant is getting 5% in the PS due to gateway plus the cash balance credit.

Since the participant doesn't satisfy the PS TH conditions, I'd assume he isn't eligible for the combined plan gateway edit: Top heavy and has to get the 2% accrual in the CB plan, even though he is getting a PS allocation sufficient to cover the combined plan TH in the PS.

So questions:

1) Any opinions/references if that's the right way to do it?

2) Is it possible for a plan to remove the last day requirement for TH in the PS plan? I see the last day language in the document but nowhere in the "checklist."

[ETA Consulting LLC]

The problem is that there is no such thing as a last day rule in a DB plan; and the Cash Balance plan is a DB plan. So, if the CB is part of a Top Heavy group of plans, then you must satisfy that provision. How you do this is done when the plans are actually drafted; so you're merely continuing to follow the provisions of the plan.

Speaking of plan design, you have to ensure you do not have accrual requirements that would preclude you (in any way) from satisfying the gateway when needed. This, too, should be contemplated when you're actually drafting the plan language.

Right now, all you can do is follow your plan. If you're in the process of designing a combined 401(k)/CB plans, then it's easy to make recommendations to avoid this issue.

Good Luck!

[Tom Poje]

" I'd assume he isn't eligible for the combined plan gateway"

not sure about this statement. once you receive any nonelective contribution of any type you must receive the gateway. doesn't matter whether you have hours or otherwise.

The same thing happens all the time with safe harbor contributions for people who terminate, they get bumped up to the gateway.

top heavy is a different matter.

I think the language in the DB docs I've see simply says if you particpate in both plans you will get the top heavy in the dc (w/o addressing last day or hours, of course, but it's past my 4:15 limit so I'm only guessing on that).

of course, that probably conflicts with the DC language which says you have to be there on the last day.

[stbennet]

Gosh dang it, I need to start proofreading. Meant combined plan TH. Yes, he clearly gets the gateway.