Top Heavy Defined Contribution PLan, Failed to make TH contributions Options

[Gary]

An employer sponsors a defined contribution plan.

It began as a money purchase plan and then was converted to a profit sharing plan with a 401k feature.

For the past few years it has been a 401k plan with a discretionary match. There have been no matches since 2004.

The employer was informed that the plan has been top heavy for many years, but the employer/sponsor has not made TH contributions.

The employer is now considering terminating this plan, making distributions and not making TH contributions for prior years.

It seems to me that this plan can be disqualified upon audit, due to not meeting the TH contribution requirements and thus all employer tax deductions can be retroactively disallowed.

Any other views?

If the plan were terminated say 3/31/08, with distributions made by 5/31/08 and a final return filed by say 12/31/08 would the statute of limitations be three years from 12/31/08 and thus if the plan were not audited prior to 12/31/2011 then the IRS could not disqualify the plan retroactively?Thanks.

[SWH]

I'm not sure about the statute of limitations, but I would think that the non-highly/non-key's portion of the plan would not be disqualified -- just the HCE/key portions?