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What about Top-Heavy testing?


Guest fender5150
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Guest fender5150

I see that the ACP test is be required for 403b plans in 2009 (if there are NECs), and the Gateway Minimum test is required if multiple plans or multiple groups are involved.

Do these final regs also require tests like Top-Heavy testing?

Here's a quote from final regs.

"These final regulations, like the 2004 proposed regulations, require a section

403(b) plan to comply with the nondiscrimination requirements for matching

contributions in the same manner as a qualified plan. Thus, a non-governmental

section 403(b) plan that provides for matching contribution must satisfy the

nondiscrimination requirements of section 401(m)."

What if someone tries to argue that a plan became top-heavy because of grouping? If that assumption could be made, then it could be argued that the Top Heavy test is part of the "nondiscrimination requirements" that a 403b plan must "comply with" "in the same manner as a qualified plan"?

Am I interpreting this too harshly?

Please say yes.

IE: Are there other Non-discrimination tests that may be required (like some unusual version of the coverage test)?

Please say no.

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Guest fender5150
403b plans are exempt from the TH rules because they are not qual plans.

Though 403bs are not qualified plans, they are going to be subject to anti-discrimination testing if they provide employer contributions. I don't know that the Top-heavy test should be dismissed.

I'm not finding anything that definitively says "These are the tests that will be required under certain circumstances".

And the quote I included in my original post seems vague. Does anyone know of something more definitive?

Thanks!

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403b plans are exempt from the TH rules because they are not qual plans.

Though 403bs are not qualified plans, they are going to be subject to anti-discrimination testing if they provide employer contributions. I don't know that the Top-heavy test should be dismissed.

I'm not finding anything that definitively says "These are the tests that will be required under certain circumstances".

And the quote I included in my original post seems vague. Does anyone know of something more definitive?

Thanks!

IRC 403(b)(12)(A)(i)

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Guest fender5150

I just had a conversation with a rep from the IRS. For what it's worth; here's what they had to say:

The Top-heavy test is required for 403b plans.

The ACP test was always required, but it wasn't considered to be a good benchmark, because of the 'reasonable effort' language in 98-23. The language that will be taken out effective 1/1/09.

The getway test could also if cross-testing is used to determine employer contributions

The biggest compliance problem they see is proof of full-inclusion - I think that's the term he used.

Anyway. I hope someone finds this helpfull.

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I just had a conversation with a rep from the IRS. For what it's worth; here's what they had to say:

The Top-heavy test is required for 403b plans.

The ACP test was always required, but it wasn't considered to be a good benchmark, because of the 'reasonable effort' language in 98-23. The language that will be taken out effective 1/1/09.

The getway test could also if cross-testing is used to determine employer contributions

The biggest compliance problem they see is proof of full-inclusion - I think that's the term he used.

Anyway. I hope someone finds this helpfull.

Did you ask the agent for the cite?? If you check the IRC section I cited you will find the correct answer for TH test... but I guess thats too difficult for you.

by the way its not the "getway" test.

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I read the IRC Sec 403(b)(12)(A)(i) and don't see a tie out to Sec 416 or any other reference to TH. My skills at reading may be weak, or this is too convoluted for me to work through. If mjb can offer a bit of direction as to how this speaks to TH I'd appreciate it.

None of our 403b documents reference TH, so we would have a hard time actually complying without definitions as to who is key etc. We have the "PPA" version of the doc (proposed) and nothing is in there either.

Assuming that some 403b plans would be TH under whatever unknown circumstance there may be, and that these often cover a few hundred non-deferring people, a 3% ER contribution would be spectacular! I really hope we can all get our heads around teh Top Heavy issue soon.

Thoughts anyone?

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People, you really should look at the law first, and then come to the message board second (or third, or fourth . . .). The 403b citation provided by mjb identifies the qualified plan rules to which 403bs are subject. 416 is not one of the rules identified.

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I misinterpreted mjb's last post. My post did in fact support the idea that I could find no way to bring TH into the world of 403b. Bottom line, no TH in 403b. Thanks

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  • 2 weeks later...
Guest fender5150

I am so sorry! I typed my reply on a Saturday Night prior to going out. (The IRS Agent I talked to a couple weeks ago) said the TH test is definately NOT required. But as I mentioned, the agent said their biggest compliance issue is Universal Availability, which he felt was the simplest issue to comply with.

After a bit of research; I believe the following tests come into play for 403b plans - depending on plan features of course:

-Universal Availability 403(b)(12)(A)(ii)

-Maximum Deferral 402(g)

then if you have NECs

-Annual Limitations 415©

-ACP 401(m)

-Coverage Test 410(b)

then if you have groups, multiple plans, cross-testing, etc.

-Gateway minimum 401(a)

Let me know if you think I'm missing anything.

Again; I'm very sorry for the typo on my last post (Jan 30). I will try to be more careful.

Thank you for your feedback.

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