Another Top Heavy Question

[Guest KD40]

The plan is TH for the determination date of 12/31/2001. In the plan year that this determination date is related to (1/1/02 - 12/31/02), the plan only had deferrals being made. They were made by some of the Keys. The plan also had some forfeitures reallocated as well.

I am getting confused by some readings. In some instances, I think I am reading that since the plan did not have any Employer contributions to the plan, then technically the TH minimum is NOT require. But, in some instances, I believe I am reading that the TH minimum is required.

And if it is not required based on the fact they only had deferrals throughout the year, would the fact that they allocate forfeitures (which IS employer $'s), force them into the TH minimum?

[Tom Poje]

since there were only deferrals, it is obvious the plan is not safe harbor - therefore, there is no free ride on top heavy

a top heavy must be given since the keys deferred, and it is equal to what the top heavy's deferred up to 3%. if the highest key deferred 2% but then receives some forfeitures, then this will increase the top heavy as well, since he will now have 2% plus forfs.

[Guest KD40]

Thanks Tom.

One other question regarding the forfeitures.

Can we take the forfeiture allocation that the Non Key's got and back that from the 3% TH Minimum? I realize that if this were the case, when it is all said and done, that all of the Non keys will need to be at 3% total. That meaning that if we excluded anyone for an hours requirement, and they did not receive the forfeiture piece, we would need to make sure they received the 3%. We can still exclude people for the lasy day rule, but not for any kind of hour requirement.

[austin3515]

Correct on all counts!

All non-keys must get 3% of employer contributions from any source including forfeitures. Anyone excluded from the top heavy because of the hours requirement must still get 3%, and you may exclude anyone who was not employed on the last day, if the plan does not require employment on the last day to receive the forfeitures.

[Earl]

the doc might also say that only non-keys get a TH min. If you give the forfs to only non-keys, you might end up owing very little to get them to the 3%.

[austin3515]

Did you mean that the doc might say only non-keys get the forfeiutres? I thought only key employees never get a TH?

[Blinky the 3-eyed Fish]

Some documents have the option when drafting to allow the key employees to also get the TH minimum.

[Brian Gallagher]

i was under the impression that salary deferrals are considered employER contributions. the only employEE contribs are either rollover or after-tax contributions.

simply, employER contributions are one that may be deducted on the company's taxes, thus people deferrals are included in that.

am i right in thinking this was, or did i over-simplify it?

[Guest Therese]

Deferrals are generally treated as employer contribs. However, they do not count toward the top heavy minimum payable to non-key employees (but last time I looked, key employees' deferrals count as employer money in determining whether a top heavy contrib must be made).

[Earl]

I guess thats what we get for talking about Top Heavy....