Top Heavy Requirement Re: Age

[Guest Ted Kowalchuk, CFP, CFS,]

Does a Top Heavy plan need to provide a TH minimum benefit to EEs that have not satisfied the age requirement? I have a plan with 21 & 1 as the eligibility with 3 EEs age 17. I do understand that EEs that work 1,000 hours and are employed on the last day of the plan year are required to receive a TH minimum allocation. Please advise. Thanx.

[rcline46]

Top Heavy contributions are required for ANYONE eligible for the plan and employed on the last day of the year. There is NO hours requirement permitted.

In your case the 17 year old participants must get Top Heavy unless the plan specifically states those who have not satisfied the statutory (21/1) eligibility rules will not receive the T/H contribution. I would be the farm your plan does NOT specify that, and if it did I would want to see the IRS LOD that it was ok.

[Mike Preston]

Reed, I'm not sure I agree. Here, somebody is asking about EMPLOYEES. Further, they are asking about employees that have not satisfied the age/service requirement of the plan.

My answer is that you only need to provide top-heavy minimums to PARTICIPANTS. Under no circumstances do you need to provide top-heavy minimums to employees who are not yet participants.

OK, there are some very esoteric situations I can see where an employee would need to enter the plan pursuant to an amendment in order to ensure that the plan satisfied 410(B), but they are very few and far between. So I don't think that is what is being discussed here.

[rcline46]

Ah, the ee/participant problem. Sorry ted - I did say participant and you said employee (with a 21/1 plan!). You did not say participant as mke correctly pointed out.

They are not entitled to a contribution because they are not in the plan.