Top-heavy Minimum / Change from Excluded Class

[austin3515]

Participant is a member of an excluded class in the document. After getting "promoted" to an eligible class, they are going to be eligible for a top-heavy minimum. Can I use comp while eligible in this scenario? What if they went the other direction, eligible class to an ineligible class?

In other words, can I always limit the top-heavy contribution to compensation earned while not part of an excluded class?

I tried to find a spot-on reference in the document and in the EOB but couldn't find anything...

[Lou S.]

No, top-heavy minimum is based on 415 compensation for the year. It is no different if a participant enters mid-year.

[John Feldt ERPA CPC QPA]

What if the ineligible class was "collectively bargained" and the employee had been part of a union that had bargained in good faith such that participation in this plan was not available for the union as part of their overall wage/benefits negotiations. The union employee gets promoted to a non-union management job.

Would their union wages, which were bargained to not be available for treatment for this plan, nonetheless be included in the calculation for the top heavy minimum?

[austin3515]

Because you union people are specifically exempted from getting the THM I think that one is more clear cut that they don't get it for the portion of the year that they are union.

[austin3515]

1.416-1 Questions and answers on top-heavy plans.

M-7 Q. What is the defined contribution minimum?

A. The sum of the contributions and forfeitures allocated to the account of any non-key employee who is a participant in a top-heavy defined contribution plan must equal at least 3% of such employee's compensation (see Question and Answer T-21 for the definition of compensation) for that plan year or for the calendar year ending within the plan year.

Based on the above, I concluded that she gets the THM on full year pay, No wiggle room at all. The same regs by the way indicate very clearly that union employees do not get the THM. So if the exclusion related to union v non-union I believe it is very clear that the union wages would be excluded. Actually it's clear in the internal revenue code too.

416(i)(4)

(4) Treatment of employees covered by collective bargaining agreements

The requirements of subsections (b), ©, and (d) shall not apply with respect to any employee included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and 1 or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.