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SARSEP & Top-heavy


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Don't typically deal with SARSEPs - tend to find them anything but "simplified"!

However, Employer has a "grandfathered" SARSEP adopted via IRS Form 5305A-SEP. It is my understanding that:

1. Such a "model" SARSEP is automatically "deemed" to be top-heavy (i.e., to avoid the Employer's having to make a T-H determination each year).

2. The required top-heavy minimum contribution for eligible Non-Key Employees is a % of comp equal to the lesser of 3% or the highest deferral percentage of any Key Employee.

3. If no "discretionary" employer contribution is made to the SARSAEP for all participants for a plan year, then the eligible Non-Key Employees still have to receive a top-heavy minimum - or if an employer discretionary contribution is made that is less than the required top-heavy minimum, Non-Keys would need to receive an additional contribution amount, so that their total employer contribution equalled the T-H minimum.

Correct - or no?

Thanks!

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