2002 Top Heavy Determination and Prior Distributions

[Guest crosseyedtester]

When determining if a plan is Top Heavy for a 2002 calendar year plan, we look at balances as of 12/31/01. Since that date is prior to the new EGTRRA rule of including only one year lookback of distributions for plan years starting after 12/31/01, do we include 5 years , or actually just 1 year since it is determination for the 2002 plan year?

[Blinky the 3-eyed Fish]

You might have to look at it two ways.

If your plan has been amended for EGTRRA prior to those in 2002 accruing the right to a top heavy contribution (most likely by 12/31/02), then you will do the top heavy testing under the new rules. The new rules will consider only the 1-yr lookback period from 12/31/01 in your case.

If your plan was not amended by 12/31/02 and your determination above proves the plan to not be top heavy, you will also have to run a test under the old rules and use the 5-yr lookback period. This is because EGTRRA provides no 411(d)(6) cutback relief.