If a top-heavy plan disaggregates otherwise excludable employees for testing, who is entitled to the top-heavy minimum?

In the context of a top-heavy plan, when disaggregation occurs, the rules regarding minimum benefits can affect a broad range of employees. Specifically, when a plan chooses to disaggregate excludable employees for testing purposes, it essentially means that these otherwise ineligible employees are included in the top-heavy determination process.

Thus, all employees, including those who are typically excludable from participation, become entitled to the minimum benefits that need to be provided under the top-heavy rules. This is significant because it allows these employees to gain benefits from the plan that they would not have been entitled to under normal circumstances. The top-heavy rules are designed to ensure that non-key employees receive a minimum allocation of benefits when a plan is top-heavy, thereby promoting broader inclusivity within the retirement benefits structure.

The reason this understanding is crucial lies in the broader objectives of retirement plans and compliance with federal regulations. Top-heavy regulations aim to ensure that a disproportionate amount of benefits does not favor key employees or highly compensated individuals at the expense of rank-and-file employees.