safe harbor match with top heavy plan

[MR]

I know this issue has come up before, but I'm curious how others are handling it. For 2002, plans consisting "solely of contributions under 401(k)(12)" which is the safe harbor match and safe harbor non-elective are not considered top heavy . The question everyone has is - what if the safe harbor plan originated as a profit sharing plan and there is profit sharing money in the plan? Do we still get out of our top heavy requirements? I haven't found a definitive answer and am wondering what stance others in the business are doing.

thanks,

mike

[Tom Poje]

Istrongly suspect we will have at least some guideline by the end of October. I am sure this question will be part of the Q and A for the IRS at the ASPA conference.

until then...

[Earl]

No PS cont, i don't see a prob in ignoring TH, but what about some minor forf reallocation? Tell the client that if he pays anyone out it will cause a TH min? yikes....

[wmyer]

well perhaps forfeiture reallocation could be used to reduce match.

[Guest RJM]

Stated in last week's local EB seminar (and beat to death in this week's discussion's), the scenario and answers are:

Top Heavy 401(k) with Deferrals + SH Match + old partially/non vested profit sharing contribution balances.

Simply having the other money in the plan (or in the plan design) doesn't eliminate the capability to use SH Match for TH minimum. But 3 potential problems exist.

1. If a Profit Sharing Contribution is made, a TH minimum is required for those eligible, reduced by whatever SH match a participant has been allocated.

2. If no Profit Sharing Contribution is made but Forfeitures are to be reallocated, a TH minimum is required for those eligible for THM, reduced by what ever SH match a participant has been allocated.

3. If a THM is made, it goes to the usual eligible for THM, including those that didn't defer. Thus giving the folks who did defer the impression that the non-deferers got something for nothing, the deferer got less THM because s/he did defer.

Obvious solution (from a plan design standpoint) is to use Forfeitures to offset contributions or plan expenses. We've already got a hardcase ER who absolutely will not go along with either idea, demanding reallocation. Oh well.

[R. Butler]

I've been to several seminars & different positions are taken at each seminar. Whats interesting is that in one case, the same speaker took a different position at different seminars.

I am hoping that Tom Poje is correct and that this is addressed at the ASPA conference. I know that I submitted the question to ASPA for the Q&A conference, hopefully many did.

[Tom Poje]

R Butler:

hopefully then I will see you (and others) at the conference! the boss (Lorraine Dorsa) has a booth this year so I should be easy to track down.

[R. Butler]

Unfortunately, no. My boss won't shell out the bucks for it this year. I understand its really good though, so maybe next year. I'll try not to hit her up for as many other seminars next year.

I did here your boss speak at a conference in Indy a couple of years ago. She seems like a bright lady. I do remember she spoke highly of you.