Aggregated Plans with exclusions

[Cynchbeast]

We have DB/PS Aggregated plans. Both plans exclude HCEs who are not owner. Plans are top heavy and some people will move in and out of the HCE classification, meaning that some years they are eligible for accrual/allocation and other years not.

1) For an EE who is an NHCE in year 1 (became participant ant received benefits) becomes an HCE in year 2, must he still receive a Top heavy minimum in year 2 since he is already a participant?

2) If answer to 1) is yes, may the TH min be provided by either plan?

[My 2 cents]

Don't HCEs who are not Key Employees have to be given top heavy accruals/contributions when the plan is top heavy?

[Cynchbeast]

Normally yes (and by the way, yes these HCEs were not key). But my question is, if they move from an included class to an excluded class, do they still have to get the top-heavy minimum since they are already a participant, even if they would otherwise be excluded from receiving benefit.

EX: Year 1 - otherwise eligible employee is HCE and therefore is excluded; not yet a participant

Year 2 - employee becomes NHCE and therefore becomes a participant and receives benefit in both plans

Year 3 - employee again becomes HCE. He would normally be excluded from participating in both plans, but since he is already a participant in each, is he still required to receive TH min

[My 2 cents]

Not sure if this is correct, but once someone becomes a participant, as long as the plan retains liability for them, even if not in an eligible status, they remain a participant. Naturally, once someone becomes a participant, falling out of an eligible status (i.e., hourly to salary or, in this case, non-HCE to HCE) cannot result in a forfeiture.

[Cynchbeast]

So does that mean that this person would get top heavy even when HCE status ?

[Tom Poje]

My understanding is, a plan could be amended to change eligibility, and persons falling into that category would cease participation in the plan. in your particular case, if certain HCEs are excluded then I would conclude they would not receive a top heavy simply because they are no longer 'eligible' to participate - e.g not due to hours require a benefit of any type, but rather they have cease to be a participant.

ERISA Outline seems to agree - see 2.72 2012 edition.