Top Heavy determination

[Guest LoloV]

We are in the process of reviewing a 12/31/01 Top Heavy test in order to determine if a Top-Heavy minimum needs to be made for the 2002 plan year. This plan changed from a 10/31 PYE to a 12/31 PYE in 2001.

At both 10/31/01 and 12/31/01 the following amounts were receivable:

10/31/01 Profit Sharing Contribution

12/31/01 3% Top Heavy Minimum

My question is, what of the 2 contributions above need to be included in the 12/31/01 Top-Heavy test? One opinion is to exclude both contributions since they were receiveable at 12/31/01. I can see excluding the 10/31/01 P/S from the 10/31/01 Top-Heavy determination, but can it also be excluded from the 12/31/01 since it is really the next plan year? Also, can the Top Heavy contribution be excluded since it is a required contribution?

Any input would be appreciated.

[Guest Bob K]

I agree with the opinion to exlclude both.

Regulation 1.416 Q & A T-24 states that you only include the receivable for plans that are subject to Code Section 412 minimum funding.

Since a profit sharing plan is not, you would exclude them.

Let's see if others agree.

[Tom Poje]

At the 1998 ASPA fall conference, session 44 was on top heavy plans

the outline presented had the following

'However, if the contribution oblogation is created on or before the determination, such contribution is generally included in the account balance." [implying you include the top-heavy]

the footnote for this was Rev Rul ___ ____ ___

A few years ago I asked the speaker just what rev rule it was, but he could not find it, nor did he know why it was not listed in the hand out.

guess strange things can happen. I would love to figure out which ruling it 'might' have been in.

At the Fall conference in 2002, Q and A 49, the IRS speaker voiced an opinion that it was legitimate to include receivables. They didn't say you had to, just that you could.

The Q and A's 'do not represent the official position of the IRS', so, can you rely on them? In a good faith effort, it would seem reasonable, but who knows....

I think everyone I ever knew said you don't include receivables, and this particular question / answer raised a few eyebrows. Guess we'll see if the question gets brought up again.

so, I can't say whether I agree or disagree with Bob K.

[Mike Preston]

Sal Tripodi's latest ERISA Outline Book contains language that supports the use of either method and that the IRS is unlikely to challenge either method.