Top Heavy Minimum Benefits

[Rball4]

I searched about this topic and did not see it covered exactly like this, so that is why I'm starting a new post. I apologize if this is already discussed sometime in the past.

DB Top Heavy Plan:

Plan effective 10 years ago.

Top heavy each of last 6 years and will be going forward.

Participant Smith has been there over 10 years.

Plan formula is only 0.5%, so 2% TH minimum accruals will be greater.

So as of 1/1/2014, Smith has 6 years of TH service.

Question 1:

Smith's NRD is 5/1/2014, so can he get a partial year of TH service?

Plan doc says TH svc based on 1000 hours. So if he works <1000, he gets nothing, and if he works >1000 hrs, he gets a full year of TH service?

So no partial years?

Question 2:

Final average earnings (5 years) - is that full plan years only or can you use top 60 months? All literature I see refers to plan years, but there doesn't seem to be examples where someone leaves sometime other than the end of the year.

[david rigby]

1. As I read your comments, you've already answered your own question.

2. My read of IRC 416(i), "compensation" is defined by reference to 414(q)(4), but this appears to apply only to determining who is a Key EE. 416© does not define "average compensation" except to declare that the averaging period cannot exceed 5 years. Conclusion: use the plan definition.

Reg. here: http://www.ecfr.gov/cgi-bin/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title26/26tab_02.tpl

Just my opinion.

[Rball4]

Indeed, but wanted to make sure I wasn't missing anything. Thank you for the link.