Top Heavy 401(k) plan and 410(b)

[AndyH]

A 401(k) plan is top heavy and the sponsor does not intend to make a discretionary contribution, but is required to make a top heavy minimum contribution for all employees under the plan's top heavy section.

Because the top heavy minimum does not go to terminees, it happens that the top heavy allocations would not pass coverage.

Are top heavy minimums by themselves subject to 410(B)?

Would they be reportable as a dissagregated money type for 5500 Schedule T purposes?

[John A]

http://benefitslink.com/boards/index.php?showtopic=11606

I'm not sure the above thread truly gets you to an answer, but I have raised basically the same question before. Let me know if you think the above thread (and the ones it leads to) get you an answer.

[AndyH]

Thank you, John. That gives me reassurance that this is not a stupid question. Out of all the comments, only one person answered the specific question I have and it was a "my understanding" (yes) answer.

Beyond that, I agree with you, this question is not answered.

Looks like you stumped the panel.

Opinions/answers still requested to my initial questions.

[Tom Poje]

for sched T, a top heavy minimum is treated like any other nonelective, and therefore the employees are treated as benefiting.

fascinating, you fail coverage as a result (unless I suppose top heavy only goes to non key ees, and the keys are the same as HCEs) well, actually you say it failed coverage - did you mean it failed ratio percentage and average benefits test?

[AndyH]

Thanks, Tom. It failed ratio. It may pass average benefits. I was more interested in getting an answer to this question than solving this particular problem.

Plus, I'm not sure people always look at this when key employees get top heavy minimums.

In addition to the qualification question it is a reporting question as well.

Is there anything you can point to in your answer? Just the fact that it's not an elective deferral?

[Tom Poje]

Andy:

guess I would go by the following:

okay, so I am using 1999 instructions

5500 instructions, line 4c(5) an employee is treated as benefiting if he receives a contribution or forfeitures...benefiting under 401(k) if he could make a deferral, ...benefiting under 401(m) if ee was eligible for after tax or matching contributions.

obviously, top heavy doesn't fall under 401(k) or 401(m)

your possible choices are found under instructions for 401(d)

nonelective

401k

401m

ESOP

non-ESOP

I suppose you could bury the info under non-ESOP, I'm not really sure what goes there.

ERISA Outline Book simply says a participant is benefiting for coverage purposes, but it is mentioned in the same breath as ees might not share in the allocation of profit sharing contributions.