Top Heavy Contribution -Frozen Plan

[Guest UKH]

Facts: ABC Co. is a calendar year plan. For 2001 plan year, the top heavy percentage is 43.16%. The determination date was 12/31/00. End of April 2001, the 401(k) plan was frozen. For 2002 plan year, the top heavy percentage is 60.69%. Do you have to make a top heavy contribution?

I have been bouncing back and forth on this issue. My first answer is "Yes" they have to make a top heavy contribution because when the determination for top heavy was made in 2001 for 2002 plan year, the key employees were still contributing (January 1, 2001 through Arpril 30, 2001).

My second answer is to say "No". The plan does not have to make top heavy contribution for 2002 plan year since the plan was frozen and no contributions were made by any key employee in 2002.

Which reasoning is correct? Any input will be highly appreciated.

:confused:

[BFree]

No contributions by key employees in 2002 = no TH contribution for 2002 plan year.

[Larry M]

[expanding upon BFree's response:}

the top heavy contribution is the lesser of

a. 3%, and

b. highest % contribution by HCE.

Since HCE's highest contribution in 2002 plan year was 0, the top heavy contribution for the 2002 plan year is 0.