Top Heavy Testing 12/31/01 Determination Date

[Guest dll]

I just want to be sure I understand this correctly. Will someone please confirm.

If 12/31/01 is the determination date for the plan year beginning 1/1/02 I use $130,000 officer comp, 1 year look back and ignore ten largest owners for test.

If 12/31/01 is the determination date for the plan's first plan year, I use $70,000 officer comp, 5 year look back and include ten largest owners.

[Tom Poje]

yes, you are correct.

the new rules are for plan years beginning after 12/31/2001, so in the case of a new plan 1/1/2001 - 12/31/2001 to determine if you need top heavy for 2001 you use old rules.

then you turn around and use new rules to see if a top heavy is needed in 2002 as well. and as a result you could end up with 'former' key ees.

[Guest dll]

Thanks for response. Am I correct that the only problem with a former key ee is that you need to exclude balance for future testing?

[Tom Poje]

that is what the regs say, they get ignored.

(I am not sure I would call that a 'problem', it should help the test)

[Guest StephanieLSA]

I need to prove to a group of attorneys that the top-heavy test performed using 12/31/2001 as the determination date for 2002, should utilize the EGTRRA rules (excluding balances of those terminated more than a year ago). Is there anything in the regs, etc. about this? They are wondering if a "grace period" should exist for this? Does anyone know? Thanks!!

[Guest dll]

See Notice 2001-56

[david rigby]

http://www.benefitslink.com/IRS/notice2001-56.shtml