Guest LTurner Posted February 20, 2003 Posted February 20, 2003 To determine top heavy, can I include ALL NHCEs that had a balance on the determination date? Or only those still employed on the last day of the year? ALSO, can the HCEs take distributions to lower their benefit level to satisfy the top heavy (which is the lessor of 3% or the most any HCE benefits)? In this case the employer absolutely DOES NOT want to add more to the plan for anyone - other than the annual match contributions already made.
Blinky the 3-eyed Fish Posted February 20, 2003 Posted February 20, 2003 In answer to your first question, you would include in the determination of whether or not the plan is top heavy all those that did not terminate before the one-year period from the determination date. Those employed on the last day of the plan year are those eligible to receive the top heavy contribution. They have no bearing on the determination of whether the plan is top heavy. Another note that if the plan was not amended for the EGTRRA changes as of the end of the year, you need to determine the top heavy status under the old rules as well, if the new rules show it is not top heavy. In answer to your second question, an emphatic "NO". "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Guest LTurner Posted February 20, 2003 Posted February 20, 2003 Blinky, Thanks, your first paragraph will very much help us determine the actual situation. The EGTRRA amendments have been made, so we''ll be using the new rules. And, as I thought, ALAS they cannot distribute to fix. I knew this but was hoping I was wrong. I just get very frustrated by employers who pull this >>>>>>!!! Thanks again.
Gilmore Posted February 21, 2003 Posted February 21, 2003 Similar question: Plan becomes top heavy for 2003. The owner has a significant amount in his rollover account. Plan allows for distributions from rollover money. He takes a distribution in 2003 and reduces his account balance. Distribution is added back in for top heavy test for 12/31/2003, so the plan will most likely be top heavy again in 2004. But am I understanding the new rules correctly that the distribution would not be added back in for the determination on 12/31/2004 so the plan could possibly be not top heavy for 2005, or is that considered an in-service distribution that would be counted for the full 5 year look-back? Thanks.
Mike Preston Posted February 21, 2003 Posted February 21, 2003 Well, was it an inservice distribution?
Gilmore Posted February 21, 2003 Posted February 21, 2003 Mike, I guess you find these rules confusing too.
Mike Preston Posted February 21, 2003 Posted February 21, 2003 Actually, I don't. At least, not in this case. When the distribution took place, was the individual employed by the company that sponsored the plan?
Gilmore Posted February 21, 2003 Posted February 21, 2003 Sorry Mike, my sarcastic nature took over. Yes he is still employed by the employer, and is still the owner - - in service, huh?
Brian Gallagher Posted February 21, 2003 Posted February 21, 2003 Was the rollover from a related employer? If so, then it needs to be included. Otherwise, I believe it would not count towards his balance. For the Pension Answer Book 2003: In the case of unrelated rollovers, the plan making the distribution counts the amount and the plan receiving it does not consider it if it was accepted after 1983 For related rollovers, the distributing plan does not count it and the receiving plan does, regardless of the date. (it is question 26:19) Remember: two wrongs don't make a right, but three rights make a left.
Mike Preston Posted February 21, 2003 Posted February 21, 2003 I'm not aware of any guidance as to what "in-service" distribution means. In the absence of specific guidance, I think the plan english meaning would apply. Yes, it sounds like an inservice distribution to me.
Gilmore Posted February 21, 2003 Posted February 21, 2003 Brian, thanks, the rollover is related. Mike, thanks, makes sense. I guess that's why they left the 5 year look-back for inservice withdrawals?
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