Guest Larry J. Beckman Posted February 15, 2001 Share Posted February 15, 2001 Does the annual top-heavy test for SARSEP include contributions for each year stand-alone, or does it include cumulative contributions since the inception of the plan? Example: Year 1 contributions were not close to being top-heavy, but Year 2 contributions were slightly top-heavy. Does the test for year 2 use the cumulative 2 year results which indicate not top-heavy, or does it use year 2 contributions only which indicate it is top-heavy? Any help? Link to comment Share on other sites More sharing options...
Appleby Posted February 17, 2001 Share Posted February 17, 2001 The IRS has unofficially stated that the plan balance to use in the determination of the top heavy status of a SEP is the contribution made to the plan for the year for which the plan is being tested. Logically, it is not practical to include prior contributions or balances for two (main)reasons. 1. A SEP , including a SARSEP, participant canusually withdraw their contributions at any time( becasue the contributions are immediately 100% vested). ADP/ACP test has been completed 2. The funding vehicle for a SEP is an IRA. This means that the account could include regular IRA contributions would could skew the result of the test. Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
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