Bird Posted December 15, 2017 Share Posted December 15, 2017 Employer has an old (obviously!) SARSEP. No NHCEs contribute. Owner should be allowed catch-up, right? Are top heavy contributions required? I think not...IRS examiner guidelines say: Determine if the plan is top-heavy or is treated as top-heavy and if so, confirm that top-heavy minimum contributions were made. If a the plan is a SARSEP verify that elective contributions made by non-key employees were not used to satisfy top-heavy minimums, but that elective contributions made by key employees (other than catch-up contributions) were used to determine the minimum that non-key employees should receive. How do you feel about it if the owner has already contributed, say, $20,000, but withdraws the excess contributions before 12/31? Ed Snyder Link to comment Share on other sites More sharing options...
Mike Preston Posted December 15, 2017 Share Posted December 15, 2017 Agreed with everything until the last line. Withdrawing the excess doesn't mean anything with respect to the top-heavy minimum. Link to comment Share on other sites More sharing options...
Gary Lesser Posted December 17, 2017 Share Posted December 17, 2017 Yes, top-heavy contributions are required (if the plan is top heavy). Although, the IRS materials you mentioned provides that the catch-up contributions are not taken into account in determining the HCE's ADP rate (which I agree with), only the amount of elective contributions that are in excess of $18,000 (or plan limit if lower) can be treated as catch up contributions. Since no HCEs are participating, owners may make elective contributions up to the catch-up elective contribution limit ($6,000 for 2017). Assuming there are no nonelective contributions to consider, the plan IS top-heavy. Hope this helps. I agree with Mike that the distribution has no bearing. Link to comment Share on other sites More sharing options...
Bird Posted December 18, 2017 Author Share Posted December 18, 2017 Thanks, no arguments. But a question, Gary, what did you mean by this? Quote The ADP test does not apply when NHCE do not make elective deferrals in a SARSEP. Ed Snyder Link to comment Share on other sites More sharing options...
Gary Lesser Posted December 18, 2017 Share Posted December 18, 2017 Quote I meant to say that where there are no NHCE, the ADP test does not apply. I misread the facts, In your, case, the 125%-ADP rate would be zero, and all contributions except for the allowable catch-up would be an excess contribution. Will edit my post to remove that portion. Thanks Bird. Link to comment Share on other sites More sharing options...
Bird Posted December 19, 2017 Author Share Posted December 19, 2017 ok thanks Ed Snyder Link to comment Share on other sites More sharing options...
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