Top Heavy Term Plan Question

[Hoard1]

DB Plan Terminates in 2000 also in 2000 the Employer Establishes a 401(k) Plan. Will distributions from DB Plan count toward TH status?

416(g)(2)(a)(i) States that Required Aggregation Group is each plan of the employer which Key Employee Participates AND ( not or)each other plan of the employer that enables any plan described above to pass 401(a)(4) or 410.

416(g)(3)(B) State that you need to include distributions from terminated plans which if it had not terminated be included in a Required Aggregation Group.

1.298 of the ERISA Book goes though an example that seems to disregrad the Required Agregation Group Issue and only looks at that the plan covered one key to determine if it is part of the Req Aggregation Group and does not look at the second prong of the test.

Any thoughts?

[Guest Mr. X]

You are not interpreting the code section correctly. The required aggregation group is any plan in which a key employee participates OR which was aggregated to pass 401(a)(4) and 410(B). The code is simply listing those things which are required aggregation groups, albeit not clearly. I would suggest reading the regulations, they are clearer.

Therefore, in your example, you need to ascertain whether a key employee participated in the DB plan (I am assuming the plans will not be aggregated for coverage). If there was a key employee in the DB plan, the distributions would be included as with any other plan required to be aggregated.

[Edited by Mr. X on 09-26-2000 at 04:32 PM]