62. Minimum allocation

Statement of Requirement: Code § 416(c); Rev. Proc. 2023-37, 2023-51 I.R.B. 1491, sec. 9.03

Sample Plan Language:

(1) Except as otherwise provided in (3),(4) and (5), below, the employer contributions and forfeitures allocated on behalf of any participant who is not a key employee shall not be less than the lesser of three percent of such participant's compensation or in the case where the employer has no defined benefit plan which designates this plan to satisfy section 401 of the Code, the largest percentage of employer contributions and forfeitures, as a percentage of key employee's compensation, as limited by section 401(a)(17) of the Code, allocated on behalf of any key employee for that year. The minimum allocation is determined without regard to any Social Security

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contribution. This minimum allocation shall be made even though, under other plan provisions, the participant would not otherwise be entitled to receive an allocation or would have received a lesser allocation for the year because of (i) the participant's failure to complete 1,000 hours of service (or any equivalent provided in the plan), or (ii) the participant's failure to make mandatory employee contributions to the plan, or (iii) compensation less than a stated amount.

(2) For purposes of computing the minimum allocation, compensation shall mean compensation as defined in section _____ of the adoption agreement as limited by section 401(a)(17) of the Code.

(Note to reviewer: The blank shall be filled in with the section of the adoption agreement that corresponds to section B of the sample adoption agreement provisions at the end of LRM #31. Ensure that the definition of compensation includes any elective deferral (as defined in Code § 402(g)(3)) and any amount which is contributed or deferred by the employer at the election of the employee and which is not includible in the gross income of the employee by reason of § 125 (including deemed § 125 compensation if elected in the adoption agreement), § 132(f)(4) or § 457.)

(3) The provision in (1) above shall not apply to any participant who was not employed by the employer on the last day of the plan year.

(4) The provision in (1) above shall not apply to any participant to the extent the participant is covered under any other plan or plans of the employer, the employer has provided in section _____ of the adoption agreement that the minimum allocation or benefit requirement applicable to top-heavy plans will be met in the other plan or plans, and the participant receives the minimum allocation or benefit under such plan or plans.

(5) The provision in (1) above shall not apply to any employee who fails to meet the minimum age and service requirements of section 410(a)(1) of the Code for plan years beginning after December 31, 2023.

Sample Adoption Agreement Language on Minimum Benefits for Employees Also Covered Under Another Plan:

Complete if the top-heavy minimum benefit requirement is met in another plan.

Name of the other plan: ____________

Minimum benefit that will be provided under such other plan __________

Employees who will receive the minimum benefit under such other plan

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(Note to reviewer: Provision (4) above may cause the plan to fail to satisfy the uniformity requirement of Reg. § 1.401(a)(4)-2(b)(2)(ii) for plans using a design- based safe harbor, even though all other requirements of the safe harbor are met.)

Sample Adoption Agreement Language:

For purposes of minimum top-heavy allocations, contributions and forfeitures equal to _____ % of each non-key employee's compensation will be allocated to the employee's account when the plan is top-heavy.