top heavy sar sep

[Guest mariaguzzetta]

I am confused (nothing new). A client has a Sar Sep. Is it automatically deemed top heavy if a key employee makes salary deferrals into it, or do you have to perform the 60% balance test to determine if it is top heavy? Also someone has sugguested to me that starting in 2002 a Sar Sep no longer has to perform the top heavy test, although the ADP still has to be performed.

Is this true?

[Gary Lesser]

Whether the plan is top heavy depends on the document used. If a model plan and a key employee participates, it is top heavy. If a prototype, nearly all of them use the percentage method (but not all). Generally, an employer elects to use aggregate contributions (including elective) rather than account balances (which an e/er rarely knows)

[Guest mariaguzzetta]

Thanks much...