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IS top-heavy minimum required for this situation?


PLHart

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We have a new 401k/PSP plan with an effective date of 1/1/2020, but a special effective date of 11/1/2020 for 401k deferrals and safe harbor (3% non-elective) contribs (it was adopted late in the year), so the 401k & SH provisions were just effective for the last two months of the year (from adoption date forward).  Note - the plan will be top-heavy.  If the only contribs for the year are the two months of deferrals and the SH 3% will the plan be deemed to satisfy top-heavy minimum?  Or will the employer need to top off all employees at 3% of comp for the entire year?  We don't know if, as long as the 401k deferrals and SH 3% for 11/1-12/31 are the only plan contribs for the year, if the plan will be deemed to satisfy top-heavy minimums, or if they still need to do 3% top heavy min for entire year since overall the plan has a 1/1/2020 effective date.  Our hope is that the entire year TH minimum would only be due only if the employer decided to add any additional profit sharing.  IS this correct?

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The Plan is not a safe harbor plan for 2020. You need at least 3 months of deferral to qualify, 2 months doesn't cut it. Secure act didn't change that.  And you'd need to cover 12 months on the 3% safe harbor, though you could limit it to comp while a participant but I'm guessing most participants have a retro active entry date to 1/1/2020. If the TH ratio on 12/31/20 is > 60% yes you are TH for 2020, and 2021 and have a required TH minimum of 3% of annual 415 comp for eligible partcipants. Though for 2021 your 3% SH should cover the TH minimum.

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