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top-hat plan includes too many participants - what to do?


Guest Boilerburm

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Guest Boilerburm

I have a client who has a top-hat plan that includes 11 of the 40 employees. (I was not involved in setting it up or running it, and just heard about it now) They have done some reading, and now fear that they are including too many people for the definition of "select group". Does anyone have any ideas on acceptable correction methods to get them back in compliance? What issues does this raise on the historical operation of the plan? Thanks for any feedback.

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Guest wmacdonald

I have run into this befote. First, I think you need to take a close look at the group, and determine incomes, positions etc. My first thought would be to include only the top 4 or 5 people, based on the number of people you have in the company. Then I would look to an alternative plan for the balance of this group. One suggestion is to provide a "ERISA Trust", that doesn't have to conform with the top hat rules. I explained this once on the message board. If I had a small corporation with this many key people, I'd look at it.

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