Top Heavy Contribution

[Guest hpaine]

Excuse me if this has been posted elsewhere, I searched and could not find anything.

I was referencing an old Top Heavy Training Manual and came across this situation:

Company A closes it's doors on July 15th, 2002. The plan was found to be top-heavy for the year of 2002. Under IRS regulations, it says that because the company has now closed it's doors, that the TH minimum is not required.

I don't believe that I have ever ran across information indicating that this is a true statement and I have always thought that because the plan is a seperate entity outside of Company A, the TH contrib. is still owed to the plan, regardless.

Thoughts?

[Tom Poje]

I'm not sure there is a definite answer.

If it was a DB plan, with a term date of 7/15/2002, I would assume at least some ees would have 1000 hours and would therefore be 'eligible' for top-heavy. On the other hand, I would also assume the plan has been 'frozen' in the most ultimate sense of the word.

If the plan is DC, top heavy requires ees to be employed on the last day. No one falls into this category (unless you consider the last day to be the 7/15 date), so I imagine you could argue that no one is eligible in that case either.

[david rigby]

Not sure either, but I think there is a principle (perhaps in a reg.) stating that if the sponsor ceases to do business, or goes bankrupt, the plan is automatically terminated. Most plan documents will have similar language.

[Guest hpaine]

Thank you for the information.

Does this change when the plan is under a Multiple Employer Plan offered through a PEO?