Top Heavy Minimum for participant joining an excluded class

[rodin111]

Non key HCE was a participant in the company's DB plan. In 2015 he will become a member of a nonstatutory excluded class of employees.

Should he accrue the TH minimum after becoming excluded?

Thanks for help

[ETA Consulting LLC]

I debated this situation a couple of years ago. My answer was no, but there was some compelling arguments that he should, indeed, receive the TH minimum. In a DB plan, the TH requirement is that he works 1000 hours during the year. DC is employment on last day. In your situation, you're saying that he was an eligible participant that entered an excluded class prior to working 1000 hours...

Just framing it up...

[rodin111]

In this particular case, the person in cause was a participant for several years and got the annual accrual as specified in the plan's formula. Starting 1/1/15 (before performing 1,000 hrs) he was promoted and became member of a nonstatutory excluded class. My question did not pertain only to 2015, but also for subsequent years. Should we include him in the nondiscrimination tests as a non benefiting HCE (very helpful) or as benefiting non key HCE that gets the 2% TH accrual (potentially damaging for the tests)?

Independent of this particular case, this might happen to any participant, highly compensated or not that is a participant for a number of years, then becomes s member of an excluded class.

Thanks for help

[ETA Consulting LLC]

Well, we know that "IF he was not an eligible participant at any time during the year", then he would not be entitled to a TH minimum. So, the subsequent year question is answered. As for whether or not he is entitled to a TH minimum for a year in which was he an eligible participant (for at least a part), the answer seems somewhat debatable.

We know that you must be a participant (e.g. not merely an employee, but actually meeting plan eligibility) to be eligible for the TH minimum. For any year that this is not the case, you would not possible be eligible. We were all in agreement on that issue. The debate was with respect to years in which the employee was eligible for only the first part (prior to meeting the eligibility for the TH accural; 1000 hours in DB and last day in DC).

Again, just framing it up...