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A plan which consists solely of deferrals and safe harbor contributions is deemed not top-heavy. As soon as a dollar of profit sharing goes in to the plan - regardless of whether it goes to a key or non-key employee - the exemption is lost. Now the plan must provide the top heavy minimum. First check the highest allocation rate to any key employee, including deferrals. If that's greater than 3%, then the top heavy minimum is 3%. Then look at each of the non-key employees, and see how much they received in safe harbor matching contributions. If they deferred at least 3% (or 5% if a QACA), then their safe harbor match would be at least 3% and they would not need any additional employer contribution. Then you have to give a profit sharing allocation to each of the other non-key employees who were employed on the last day of the year. If they received any match at all, then the profit sharing just has to be enough to get them to 3% match + profit sharing. If there are any non-key HCEs that received profit sharing, then you have to test the profit sharing allocation for coverage and non-discrimination. All of this is assuming that it agrees with your plan document. This is what the plan documents that I use say, but you have to read yours to make sure it's the same. For example, yours might give the top heavy minimum to all employees as opposed to just non-keys, or it might not have the last day requirement, or something else entirely.

I assume this is a DC plan? If so then 1.401(a)(9)-5 applies. So the default rule is that you use the entire balance, vested or not. However if the RMD exceeds the vested balance, then you only distribute the vested amount. If we're talking about someone who terminated during 2025, then also be sure to check the plan document's rules about when forfeitures occur. If they are deemed to have a forfeiture immediately upon termination (say because their vested account balance is less than $7,000) then their account balance as of 12/31/2025 (for the 2026 DCY) would only be the vested amount. For 12/31/2024 (used for the 2025 DCY, due by 4/1/2026) there couldn't have been a forfeiture by then so I think there's no question that the full account balance is used.

https://www.plansponsor.com/blines-ask-experts-410b-coverage-testing-firms-401k-403b/ I had a few minutes before I am heading out for dinner :). This should help!

Yes. both sub-plans still need to satisfy the overall gateway.

I had this scenario and had them set up a safe harbor match plan for this reason. There is a special rule about coverage testing for the match for 403bs and 401ks,. Someone else might be able to tell you the site, but there is something so make sure you find it!

I would add one thing to C.B. Zeller's comment. To be deemed not top-heavy, the plan must consist solely of deferrals and safe harbor contribution AND the eligibility requirements for both deferrals and the safe harbor contribution must be the same.

@justanotheradmin for the win! @Mleech this is excellent advice in each of those posts.

RBD is still 4-1-26 even if lump sum coming later in 2026.

If the kids are not deferring the maximum - perhaps their tax advisor could educate them on IRAs. If they are eligible to make IRA contributions, might be better than messing up the 401(k) testing with deferrals. They could still be eligible for the plan, and help testing, but a way for them to still get tax savings, but not skew testing.

CuseFan has the best suggestion. Restructuring is sometimes also known as component testing. both testing groups would have to meet minimum gateway. Generally the youngest HCE + older NHCE are put in a group and tested on a contribution allocation basis, the older HCE and the younger NHCE are tested on future basis. For next year - I would not suggest adding in allocation conditions - if you do , it handcuffs who can receive an discretionary employer contribution. Your plan document might waive allocation conditions for purposes of meeting gateway, but what if a younger NHCE left partway way through the year, and it would be advantageous to testing to give that person a larger contribution? you would not be able to if the plan has a last day employment condition. That person would be limited to the Safe harbor, and perhaps gateway. I do suggest that safe harbor nonelective go to NHCE ONLY in plans that are cross-tested. If it works out to give the HCE 3% and not skew testing, that can always be accomplished with a discretionary contribution. Alternatively - for some future year - if the plan is small, owner comp is high, and general participation is low - sometimes it works out better for the plan to use safe harbor match. The owners defer the maximum, if their comp is high they can receive a large match, and then make up the difference in discretionary employer. Depending on the specifics, it might get the owners to the maximum overall limit with less minimum to the NHCE to pass testing. May not work as well if the plan is top heavy. But something to consider sometimes.

Thanks again to responders! We decided to provide the former participant with a letter stating that as a former participant with no benefits in the plan now, she is not entitled to receive an SPD at this time. We provided a copy of the last statement she received which reflected the amount she was paid along with the check number and date of her benefit check which was rolled over to an IRA. We stated that we do not maintain historical copies of SPDs. We think she met with SSA in-person as she was never reported on Form SSA which would explain why her request was stated the way it was. We do have copies of historical plan documents but did not provide that to her.

The owners might not have very high compensation. If person's earned income for plan purposes is $85,000 it will be hard to get a maximum contribution with just deferrals and employer. If the owners have personal taxable investment accounts with large balances, its a way to basically transfer $70,000 from that account into a Roth account each year. And then instead of sitting in a personal taxable investment account, the money sits in the plan as roth and grows tax free. I'm not a big fan personally, but that's what I hear from some that use it for that purpose.