TH min

Background:

A 401(k) plan had a safe harbor match provision with a 1 year (1,000) eligibility requirement when it was established in 2014. It has been TH for all year including the 2014 plan year.

There was a one time eligibility requirement waiver amendments in 2016. Because of the eligibility waiver, an existing employee (EE1) who works under 500 hours each year entered into the plan in 2016. However, this employee never deferred any 401(k) money to receive any safe harbor match.

The plan was amended in 2018 changing the safe harbor match to 3% safe harbor non-elective when the employer established a Defined Benefit plan in addition to this existing 401(k) plan. The eligibility requirement stayed the same (1 year of service) with 3% safe harbor non-elective allocation requirement of 1,000 hours during the plan year. the The aggregate plan has been TH for all plan years.

Question

Is this safe to assume the 401(k) plan was exempt from TH from 2014 through 2017 if the only contribution were deferrals and safe harbor match regardless of the one active employee who never deferred didn't receive any matching contribution?

Is this also safe to assume the aggregate plan is not exempt from TH starting the 2018 plan year because of the DB accruals?

If so, do I have to determine the plan TH status as of 12/31/2017 while the plan had deferral and safe harbor match contributions only (assuming calendar year plan) for the plan year beginning 1/1/2018 and provide TH min for EE1 for 2018 plan year and there after?

Or, do I have to determine the plan TH status as of 12/31/2018 as the aggregate plan had additional contribution besides deferral and 3% safe harbor non-elective (DB accrual) for the plan year beginning 1/1/2019 and provide TH min for EE1 for 2019 plan year and there after?

My biggest confusion is when should the TH min should start 2018 or 2019?

You can't have an hours requirement for a safe harbor contribution. Ee1 will therefore get a top heavy contribution starting in 2018. You will use 12/31/2017 as your determination date for top heavy in 2018. Don't forget gateway.

Thank you very much, Mike.

When the 3% Safe Harbor Non-elective (SHN) added to the plan in 2018, the eligibility to enter the SHN portion of the plan was 1 year (1,000 hours).

• Ee1 never worked 1,000 hours during the 1st year of employment and each plan years thereafter.
• Is this safe to assume Ee1 is not a participant (eligible) for SHN portion of the plan?

Provided the plan must provide above the gateway minimum to passes the the DB/DC cross-test without including Ee1 in the test.

• Since Ee1 is eligible for Top heavy minimum thereby for gateway, is Ee1 must be in my DB/DC cross-test each plan year starting 2018?
• If so, does this mean that Ee1 should receive whatever percentage required to pass the cross-test, if it is above the gateway and top heavy minimum?

25 minutes ago, AdKu said:

When the 3% Safe Harbor Non-elective (SHN) added to the plan in 2018, the eligibility to enter the SHN portion of the plan was 1 year (1,000 hours).

• Ee1 never worked 1,000 hours during the 1st year of employment and each plan years thereafter.
• Is this safe to assume Ee1 is not a participant (eligible) for SHN portion of the plan?

Provided the plan must provide above the gateway minimum to passes the the DB/DC cross-test without including Ee1 in the test.

• Since Ee1 is eligible for Top heavy minimum thereby for gateway, is Ee1 must be in my DB/DC cross-test each plan year starting 2018?
• If so, does this mean that Ee1 should receive whatever percentage required to pass the cross-test, if it is above the gateway and top heavy minimum?

I tried I really tried. Failed. Is the above your definition of cofeffe?

I'm sorry, I have hard time to understand what you're trying to tell me.

I understand if someone is in the plan there is no hours requirement to receive SHN. I also understand that TH min triggers gateway.

But my confusion is:

• Ee1 is not in the DB plan and according to the attached reference Ee1 may not be eligible for cross-tested allocation because did not work 1,000.
• Since Ee1 is only in the DC plan, qualifies for Dc plan top heavy thereby gateway
• But if the plan requires more than gateway to pass the cross-test,
•         does this mean Ee1 must receive whatever minimum % above the gateway needed to pass the cross-test?
•         or Ee1 should not be in the cross-test (according to the attached reference) but receive gateway minimum if it is above the top heavy min?

Excerpt from the attached file page 35.

Cross-tested Plan Design Issue
• Employee not eligible for cross-tested allocation because did not work 1,000 hours required by the plan
• Employee receives 3% top-heavy as employed on last day
• 5% cross-tested gateway being used by the plan. 
• Because the employee is benefiting at 3% (due to top-heavy), the employer must give 2% more to pass gateway test
ASPPA - Advanced Top Heavy Testing and Plan Design.pdf

You mentioned the employee is only a participant due to a special eligibility window. If they never worked 1000 hours in any plan year, are they otherwise excludable for testing purposes? If the group of otherwise excludable employees passes without needing to cross-test (perhaps, because there are no HCEs) then the gateway does not apply to that group.

Thank you, C. B. Zeller.

Is there any top heavy issue as far as employees who entered to the plan "....due to a special eligibility window" but "....never worked 1,000 hours in any plan year....."?

The employee has to receive the DC top heavy minimum if they were employed on the last day of the year. If they are receiving a 3% safe harbor non-elective contribution then that probably takes care of the top heavy minimum.