The Effect of Top Heavy Allocations on Gateway Allocations

[mming]

A top heavy PS plan uses several rate groups determined by levels of comp. The plan defines comp as only that paid while a participant, and since there are dual entry dates, some new participants must use 6-month comp for testing. If the 3% TH allocation based on a full year's comp for one such participant equals 5.5% of his 6-month comp, would everyone else in that individual's rate group have to then also receive 5.5% of their comp instead of the 5% gateway allocation? The document doesn't seem to address this possibility.

[chc93]

Maybe look at it this way. First, you allocate 5% of 6-month comp. Then check the TH 3% of full year comp. If less than 3% of full year comp, allocate additional amounts to get to 3% of full year comp. In this case, you have met both the 5% of 6-month comp gateway requirement, and the 3% of full year comp for TH. I don't think that the rate group increases to 5.5%. And the gateway requirement is still 5% of participation comp. In other words, TH is a separate determination from rate group testing (other than the full contribution including the additional amount for TH is tested)....