Top Heavy Profit Sharing Plan

[Guest LWilson]

A profit sharing plan is deemed to be top heavy for 2001. The plan is strictly profit sharing - no deferral provisions.

Two employees who had met eligibility requirements in 2000 (1,000 hours, age 21), worked fewer than 1,000 hours in 2001. They are not terminated.

Because they had met eligibility requirements in a prior plan year, must they receive a top heavy minimum for 2001?

My confusion lies in the wording I memorized a few years back for the C2-DC: "Those non-key employees who are participants in a 401(k) plan and who are employed on the last day of the plan year must receive a top heavy minimum."

This plan has no 401(k) provisions, so, naturally, I am probably reading too much into the rule, but I want to make sure I do right.

By the way, if these employees must receive the top heavy minimum, I am assuming the money must be deposited at the trust by September 15?

[Mike Preston]

IF they are participants (which they are) and they are employed on the last day of the year (which they are) they get the top-heavy minimum.

As far as the date goes, there is no deadline I'm aware of. There are provisions of the Code and Regs that serve to encourage a contribution before the date that is 30 days after the due date of the tax return. Contributions made after 30 days after the due date of the tax return are applied to the current limitation year (See 415 regs). For example, if this is a corporation on extension until 9/15, you have until 10/15. If it is deposited after 10/15, then you have to hope and pray, effectively, that these individuals continue to have 415 comp in the current limitation year or you have a violation of 415. Yuck.

[Guest LWilson]

Thanks! Glad to have that confirmed.