dual eligibility and top heavy

[Guest richard j. decock]

401(k) plan. employees immediately eligible to make deferrals but must wait a year for profit sharing and match. If the plan is top heavy, does the employer have to provide a top heavy contribution to those who are eligible to defer but ineligible for ps/match?

[wmyer]

Yes.

[Guest richard j. decock]

do you have cite? I certainly cannot find anything to the contrary. Q&A M-10 of the top heavy regs certainly indicates that a contribution is required.

[jaemmons]

I don't know of a specific cite in the Regs or Code, but every participant in a top heavy DC plan must receive the TH min if they are still employed at the end of the plan year. The definition of "participant" is any employee who benefits under the plan. Since elective deferrals are considered in determining what the TH min is for the current plan year (Regs 1.416-1 Q&A 20), if an employee is eligible to defer and is still employed at the end of the year, they would receive the TH min for the plan year. They do not have to be eligible for PS or match in order to receive TH mins, because TH min are required contributions and in DC plans are allocated to those participants I indicated above.

[Tom Poje]

agree with a above answer. the problem lies in the fact that top-heavy rules were written way before 401ks became big time stuff.

The ERISA Outline book also indicates such ees would need a top-heavy.

now, that being, there are reports of documents getting determination letters stating top-heavy only to those who met the profit sharing eligibility (one year of service rather than immediate)

In light of the rules with safe harbor 3% non electives, this would seem logical, but I would want the IRS blessing before proceeding further.