Top Heavy Benefit after Freeze

[Pension RC]

I am working on a DB plan with a business owner and three staff people that was effective 1/1/2006. Although the business owner's accrual percentage was much higher than the the staff people's accrual percentage, it passed non-discrimination by being tested in combination with a profit sharing plan. Also, top-heavy minimums were satisfied through the profit sharing plan. The profit sharing plan was terminated 12/31/2010 and, therefore, the defined benefit plan was frozen 1/1/2011. Now the DB plan is overfunded. The business owner would like to unfreeze the plan to absorb the surplus, and to create an A + B benefit using a new, general tested, formula. All four people have been participants since 1/1/2006. It seems logical to me that I would need to provide a top-heavy minimum only for the 2013 accrual and not for all 6 years of top-heavy service (2006 - 2010 and 2013). Am I thinking about this correctly?

Any help would be appreciated!

[My 2 cents]

I am still trying to understand the logic of "The profit sharing plan was terminated 12/31/2010 and, therefore, the defined benefit plan was frozen 1/1/2011." Wouldn't that mean that nobody has a satisfactory way to prepare for retirement? My expectation would be that the staff people are not earning enough to do it on their own.

[Pension RC]

I agree that the staff people will need some form of pension. What I meant was that, since there would no longer be a way for the DB plan to pass the general test without changing the formula (and the owner didn't want to provide larger benefits for his staff), the owner decided to freeze the plan.

[Rball4]

Years for TH minimum benefit are top heavy plan participation years. 2006-2010 TH was satisfied by the DC plan. 2011-2012 was frozen. So I would agree that 2013 would be the only year a TH minimum would need to be calculated for. I believe minimum vesting would apply for all years. Note, plan doc may need to be restated or amended for TH provisions since now TH applies to DB plan rather than DC.

[david rigby]

Just to make sure, will the unfreeze include recognition of 2011 and 2012 as benefit service?

[Pension RC]

No - it won't. Therefore, I can just provide the top-heavy accrual for one year - 2013. Correct?