Excluded Employees & Top-Heavy Contribution / Minimum Gateway

[415 Limit]

Calendar year 401(k) plan (not safe harbor) is top-heavy. Plan has a participating employer effective 1/1/2014. All employees are eligible to make 401(k) deferrals after meeting the plan's eligibility requirements (1 YOS/age 21/semi-annual entry). PS is cross-tested (separate allocation groups for each participant) w/last day & 1,000 hour requirement. For 2015 can we amend the plan to exclude the employees of the participating employer for just the PS component of the plan (coverage will pass), and if so are they required to get the top-heavy minimum contribution & the minimum gateway contribution for the year?

[Lou S.]

Since no one is yet employed on the last day of the year, they are not yet entitled to a contribution, and you can amend the plan to exclude them from receiving an allocation, subject to passing testing of course.

However, because the plan is top-heavy and they are a participant for some component of the Plan (namely the 401(k) component) they are entitled to a top-heavy minimum. Furthermore since they are receiving some er contribution in the form of THM they would then be required to receive additional gateway contribution if the THM did not cover he gateway.

[415 Limit]

Thanks Lou S., that was our interpretation as well.