Top Heavy Testing Questions

[Guest KD40]

My plan year I am testing is 6/1/2001 - 5/31/2002.

Questions:

1. What is my determination date?

2. Do I only look back at any distributions that occurred for the period 6/1/2001 - 5/31/2002?

[Tom Poje]

the new top heavy rules pertaining to EGTRRA are not to take place until plan years beginning after 12/31/2001.

your plan year is before that date, so the old rules still apply, as I understand things.

[Guest KD40]

So, is my determination date 05/31/2001? And also, I can look back at distributions made in the previous 5 years from the date?

Thanks.

[david rigby]

Top heavy status is determined at the date of 5/31/2002 for the purpose of giving (or not giving) a top heavy accrual during the plan year beginning 6/1/2002.

As always, be careful if you have more than one plan.

[Guest KD40]

This is the way that our department completes Top Heavy testing. Which seems opposite of all information I have read on what the determination date is.

For this scenario, the plan year is 6/1/01 - 5/31/02 and I am completing the testing now. I am using 5/31/02 as my determination date and am only looking at distributions back for the year 6/1/01 - 5/31/02.

Using the 5/31/02 as the deterimation date rather than what I thought of 5/31/01, the plan is top heavy. It is because of distributions that left the plan in the last 5 years and now since I can only look back 1 year, that is the reason.

Help.

[kocak]

For plan year 6/1/01 to 5/31/02 (assuming it is not a new plan) the determination date is 05/31/01. You use the "old" top heavy rules (5 yr look back on distributions, top ten owner is key employee) to determine top heavy status for the PYE 05/31/02.

For the plan year 06/01/02 to 05/31/03, the determination date is 05/31/02. The "new" top heavy rules apply, so that only participants who have had an hour of service (and are not former key) in the 6/1/02-5/31/03 plan year are included. Their distributions made in the last year are included, inservice distributions made in the last 5 years are included.

michele

[Guest KD40]

That is exactly how I understand things should work in regards to the top heavy determination date and the look back on the distributions. Has anyone ever heard of doing TH testing the way I explained it? The reason given to me for having the determination date as 5/31/02, is so we can give the client enough time to make the contribution if needed.

[R. Butler]

Only for new plans, will the determination date be the last day of the current year, otherwise the determination date is always the last day of the preceding year.

I am not certain why someone would think that using the wrong determination date extends the due date of the contribution.

[kocak]

When doing compliance testing, the first and last things I do are top heavy testing.

Assume I working on the 5/31/02 valuation report:

First - look to see whether the plan is top heavy in the year you are working on (5/31/02). This determination was made using data as of 5/31/01 and is usually done with the 5/31/01 valuation report.

If the plan is top heavy for the 5/31/02 plan year, then I have to make sure that my minimum allocation and minimum vesting requirements are met for that year.

In the Middle - 410(B), 402(g), 415©, 401(k), 401(m), 401(a)(4), 404 testing.

Last - look to see if the plan is top heavy for the next plan year (ending 5/31/03). Again, this determination is made using data as of 5/31/02. This allows us to give the client a "heads up" and may influence decisions key employees are making during the plan year.

michele