Top Heavy Distribution

[MBCarey]

Yet another top heavy question.

I have a Key Employee (5% Owner) who terminated in 2000. He just took his distribution in 2002.

Do I count his distribution in the Top Heavy Determination for 2003?

Thanks

[Tom Poje]

416(g)(4)(E) says if any employee has not performed services fpr the employer maintaining the plan at any time during the 1-year period ending on the determination date, any accrued benefit (and the account of such individual) shall not be taken into account.

Therefore, I would not include the distribution. I hold this overrides the rule that you count distributions that ocurred within the 1 year period.

Look at it from this point of view. Suppose the ee wasn't paid this year. you would not include him. suppose he wasn't paid for the next 15 years. You still wouldn't include him. Now, in year 16 he gets paid. All of a sudden you include him because of a distribution?