Top Heavy 401(k)

[Guest Ed Walker]

401 k is top heavy; and employees may participate immediately in the salary deferral: but must wait for a year of service for the profit sharing; there is no match or safe harbor contribution.

Are the short time employees with less than a year of service entitled to the 3% top heavy minimum? I thought they were but am being challanged.

Thanks for your help.

ED

[R. Butler]

The short time employees are entitled to the top heavy minimum provided they are employed on the last day of the plan year. See 1.416-1,M-10

[pmacduff]

Ed - you are correct...Pension Answer Book - Q24:45 - "Which employees must receive the top heavy defined contribution plan minimum contribution? Ans: Those non-key employees who are participants and have not separated from service at the end of the plan year, whether or not they have completed 1000 hours of service must receive the top-heavy defined contribution plan minimum contribution." The employee is a participant as of the date eligible to defer; they may not receive an employer allocation until after 12 months of service, but are already a participant nonetheless. I hear people refer to "dual eligibility" all the time, yet it isn't REALLY dual "eligibility", there are just different requirements to receive an allocation of employer monies. Employee is still a participant from initial participation.