What gateway language is needed in the DC document?

[shERPA]

Does a DC plan need to have language for the additional gateway 5.5% - 7.5% needed when aggregating and testing a DB/DC combo that is not primarily in nature?

I am looking at adding a DB plan for a client, they have a 401(k)/PS with a bundled provider that is on a volume document with individual groups. They would like to leave that plan as is for now. The plan provisions work, but there is nothing about the additional gateway in this document, just the DC 3:1 and 5% rules.

The volume documents I'm familiar with (Datair and Relius) do have this additional langauge.

[Tom Poje]

I think you may have a volume submitter document that is DC only, hence only the DC gateway language.

I would suspect that whichever document provider it is also has a volume submitter with db/dc language.

that being said, does the document have to contain the language? I'm not sure it does. as I recall from a Sungard memo years ago if the document doesn't contain language you have to use a corrective amendment to fix the problem.

[Guest S. Pehur]

Using the same facts except that the DC plan is a safe harbor - can you add a Cash Balance Plan for the year even though the DC plan does not state the 7.5% gateway (the 5% is stated)? Can the 7.5% gateway be added to the Cash Balance Plan since you are not allowed to amend the Safe Harbor plan mid year?

[My 2 cents]

Not a DC person, but...

Cash balance plans, being defined benefit plans, do not contain actual individual accounts (they are always completely hypothetical), and all employer contributions are technically unallocated until a benefit becomes payable and is paid. Wouldn't gateway contributions have to belong to the individual participants?

[Tom Poje]

the IRS has said you can use corrective amendments with safe harbor plans, because if a plan fails you have to be able to fix. (I think at the 2013 ASPPA Q and A but I don't have my notes handy)

I would think a DB plan could contain gateway language. I wouldn't think that would be much different than having top heavy language - that seems pretty 'individual participant' to me. (except of course top heavy language is required)