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I am having a hard time finding how Secure 2.0 will actually impact Top Heavy. I know Top Heavy Rules were changed so now non-excludable and excludable can be tested separately and the Top Heavy minimum can also be allocated to just the non-excludable. I know the provision applies to plans starting after 12/31/2023, but we have differing thoughts on when these options will actually start affecting plans. The prevailing thought is that in order to allocate the Top Heavy minimum to just the non-excludable, the actual Top Heavy must be disagg as well. Since the determination date is the last day of the prior plan year, the consensus is we cannot use the non-excludable option for the minimum allocation until 2025. Another thought is that they are independent of each other, that you can run test with all employees but then allocate the Top Heavy minimum to just the non-excludable employees. I am of the former opinion as I do not see the benefit of using disagg for Top Heavy Test since the more Non-Key balances the better for the percentage. My thoughts are the only way it makes sense to split the test is so you can get the benefit of allocating the top heavy minimum to the non-excludable, since more likely than not there are no excludable key employees which makes the test 0%. Basically I think you have to allocate the Top Heavy Minimum in the same manner as you ran the test. Thoughts? Another thought that is confusing the issue, is what if there is a Key employee who is in the excludable test, so that test is actually top heavy? With ADP/ACP and Coverage, we know there is the option to disregard the excludable employees from the test. I haven't see that spelled out for Top Heavy as yet, and if my previous observation is accurate and there is a Key employee who is excludable and that test is technically "top heavy" does that mean that those excludable employees now need a top heavy minimum?

A cross-tested Safe Harbor 401k Plan has approximately $14,000 in forfeitures. The plan permits them to be applied towards ALL employer contributions or pay Plan expenses. The Plan is Top-Heavy. The employer does not want to contribute much if anything because 2021 was down. 1 HCE/Key employee; 6 NHCEs, 1 of whom terminated before end of year. The Safe Harbor Matching contribution plus the discretionary Matching that satisfies ACP Safe Harbor total approximately $11,000. This leaves $3,000 in forfeitures on the table. The $3,000 is not sufficient to fully fund the 3% Top Heavy Minimums - this means the employer will have to fund the difference. Since it is cross-tested the Key/HCE could provide 0% Profit Sharing for himself (Plan does not require THM for Keys) - this would then permit a zero PS allocation to the 1 terminated NHCE; fund only the 5 Active NHCE staff but this still requires some employer funding to satisfy the 3% Top Heavy Minimums to the Active NHCEs. Note: the NHCEs must receive the full 3% because the HCE/Key allocation is greater than 3% even with Profit Sharing at zero. QUESTION: Is there any prohibition in using $11,000 towards the Safe Harbor Matching contributions (ADP and ACP), and not allocate any Profit Sharing to avoid the Top Heavy Minimum trigger; use the balance of the forfeitures towards the Plan's Annual Fees (that is usually paid by the employer)? Would this be prohibited since it is avoiding the Top Heavy Minimum requirement? Thank you.