Deferrals by Key Employee

[imchipbrown]

I've got a client with a 401(k) plan which when aggregated with other plans (mp/ps) is Top-Heavy. Turns out the Dad is deferring 3%+, which makes a 3% of pay contribution a requirement. (Dad is key solely by attribution - owns no stock).

We've rounded up enough forfeiture money to meet 2001 allocations. For 2002, Dad will elect 0% deferrals.

I thought the new law (EGTRRA) in 2002 was supposed to have a provision where deferrals by Key EEs weren't counted as employer contributions for Top-Heavy minimums. I can't see anywhere where this was enacted. Anyone know?

[rcline46]

You say there are other plans. If contribs in other plans are at least 3% then you have covered top heavy. You do not give TH allocations in more than one plan unless an employee is in only one plan.

[david rigby]

Correct. Also, if the group is TH, don't forget that all plans must use a vesting schedule at least as generous as one of the TH minimums.

[R. Butler]

To my knowledge the big changes where the revisions to the definition to key employee, the modification of the 4 year look back rule, 401(k) safe harbor plans won't be top heavy and matching contributions can be used to satisfy top heavy contrib. requirement. I have not read anywhere that key employee deferral contributions don't count as employer contribs. for top heavy purposes.