Second PSP

[K2]

A company has a 401k PSP with a SHM.  Participation rate is less than 50%.  Owner of company is looking to max out, but giving 3% TH or 5% gateway to all employees is expensive.  This is a 50 person, 5HCE plan.

So the thought is to create a second plan.  The two owners and a subset of young HCEs would be in that PS Only plan with 2 year eligibility.  Both plans would be TH, but the majority of people would be in a SHM only plan that would satisfy their minimum.  

So the question is whether or not a contribution to the standalone profit sharing plan eliminates my free pass on TH minimum in the SHM.

Thanks!

 

[ETA Consulting LLC]

1 hour ago, K2 said:

So the question is whether or not a contribution to the standalone profit sharing plan eliminates my free pass on TH minimum in the SHM.

Yes.  There is a required aggregation of plans for Top Heavy purposes under certain conditions.  These conditions fit into that standard.

Good Luck!

[david rigby]

Don't forget: TH conditions/testing is concerned with Key Employees, not HCEs.  Might be the same, might not.