Effective Date of Top Heavy provisions

[Guest bgiles]

We have a client that has not adopted any EGTRRA provisons. They intend on making the EGTRRA amendments along with the GUST restatement this year. A prior carrier calculated the 2002 top heavy test (12/31/01 Determination Date) using the changes to top heavy plans under EGTRRA. Namely, they only included distributions in 2002 and not the prior 4 years. The plan was determined to be top heavy in 2002 for the first time. However, in the past few years the plan has had numerous distributions to non-keys, enough such that the plan would not be top heavy if they used the old rules and included the prior four years distributions to non-keys. I am wondering if we can still use the old rules for top heavy distributions in 2002 because the client never adopted the EGTRRA amendments?

[Guest RBeck]

It's not a choice - you have to follow the new rules in operation.

[Blinky the 3-eyed Fish]

Actually, for plans where EGTRRA is not adopted you very well may have to run the test both ways. First, as RBeck said, you have to operate the plan under the top heavy rules as changed by EGTRRA, regardless of whether the EGTRRA amendment was adopted. But, because your plan document most likely (99%+) has the old top heavy methodology spelled out in the document, you also have to run the test that way as well. EGTRRA does not afford 411(d)(6) protection.

Now in your situation, the plan was top heavy under the new rules, so there is no need to run it the old way, since it's already top heavy, but it's something to keep in mind for other plans.