Safe Harbor Only Plan and Union Folks - Top Heavy Issue

[HarleyBabe]

Currently have a Safe Harbor only plan which prevents us from being Top Heavy because no funds other than the Safe Harbor were being made. Now hire 6 union folks and the collective bargaining agreement requires a small percentage of pay contribution each year.

Question, does this now mean we have additional employer money in the plan and now have to make top heavy minimums to non-key folks or does the fact that we are only providing the small employer contribution to the union folks separate us from the top heavy issue?

[ETA Consulting LLC]

Unfortunately not. I believe this is a potential loop-hole, but that is the way the rules appear to be written. There are inconsistencies in the rules:
1) Mandatory disaggregation between Union and Non-Union with respect to non-discrimination testing.
2) Non-Union employees are not required to receive the top heavy minimum allocation (but there is no cite to suggest that there balances are disaggregated for Top Heavy determinations)

Simply putting the non-union in a separate plan would solve your problem. It would seem only logical that giving them an allocation pursuant to a collective bargaining agreement shouldn't negate the free-pass on top heavy, but I cannot find anything to support that. I do not believe mandatory disaggregation in other areas accomplishes that.

I would welcome additional insight on this issue for myself.

Good Luck!

[HarleyBabe]

I asked this question at the ASPPA conference as well. Not much guidance either. My issue is that I hate to place these folks in a separate plan, separate document, separate tax forms....