Top-Heavy Minimums

[WDIK]

I reviewed several similar topics from the message boards that discuss top-heavy issues, but I have a slightly different twist.

The Employer sponsors a defined benefit pension plan. Accruals have been frozen. The Employer also sponsors a safe-harbor 401(k) plan. If the top-heavy minimums are provided through the 401(k) plan, which is the correct amount?

A) 5%

B) 3%

C) No top-heavy minimums are required.

So far, my research has me leaning toward "C", but I could also make arguments for "B".

[AndyH]

My understanding is that C would be correct, or more correctly stated, that the 401(k) safe harbor contribution is deemed to satisfy the top heavy requirements for the k plan, and there is no th min required for the frozen DB plan.

[Blinky the 3-eyed Fish]

Keep in mind that for no top heavy contribution to be required in the DB plan, the plan would have had to been amended for EGTRRA prior to the top heavy contribution being earned in the DB plan. If we are talking about 2002, then it would have needed to be done last year before 1,000 hours were worked.

You don't state whether or not the safe harbor 401(k) plan provides only deferrals and safe harbor contributions to be exempt from the top heavy, nor do you state whether it is the nonelective or matching safe harbor contribution is used. I don't have enough information to answer your question.

[AndyH]

Good points. But I don't think it matters whether it is the nonelective or the match under EGTRRA. Either are deemed to satisfy the thm.

[Blinky the 3-eyed Fish]

I added the last bit in case there were additional nonelective contributions made and the plan was not exempt from top heavy. If that were the case and the plan was using the safe harbor match, then additional contributions would be due to no or low deferrers. But if the nonelective was used, top heavy would be satisfied for all, except for limited circumstances.

[WDIK]

The Good Faith EGTRRA amendment was adopted by the defined benefit pension plan, and only safe harbor contributions are being made to the 401(k).

When making the first post, it seemed clear to me what I was saying, but obviously these issues require being very specific.

Thanks for your feedback.