Calendar year plan terminating as of 9/30/2003; has a last-day-of-the-plan-year employment requirement for allocations; top-heavy minimum contribution required?

[Guest StoneWalk]

Top Heavy Plan w/ last day clause for contribution is terminating 9/30, do they have to put in a contribution for plan year, Plan Year is 1/1 - 12/31

[R. Butler]

I'm conservative, if a key receives an allocation, I would provide top heavy minimums. Not everyone agrees with that; they reason that since there is a last day requirement the right to a top heavy contribution has not accrued.

[Guest Richard Scheer]

Maybe I'm wrong, but, if the Plan is terminating on 9/30, then 9/30 should be the last day of the Plan Year. Any non-key participants still employed on 9/30 (the last day of the Plan Year) should receive any required top-heavy contributions.

[R. Butler]

It is my understnading that terminating the Plan does not necessarily change the last day of the Plan Year. The Plan would have to amended to change the last day of the Plan Year.

[Guest Giovanni]

I just recently submitted this same question to ASPA for the Q&A session at the Oct meeting. So we'll wait and see what their response will be.

[Tom Poje]

If you are filing a 5500 what would you put down as a plan year? Assuming the money is still in the plan, then, assuming a calendar year plan, you would still use 12/31 - hence no short plan year. So just because the plan is terminated does not create a short plan year.

But I don't think that was the original question - simply is a top heavy required, and it is one of those issues that really isn't clear in the regs. To receive a top-heavy one has to be there on the last day of the plan year. so, do you argue, yes everyone is there even though the plan is terminated, or do you argue that the plan is terminated so there is no 'last day'.

suppose a calendar plan terminates as of 9/30. Fred is there on 9/30, but quits before 12/31. Now what? well, it is only a month until the ASPA conference, hopefully that will be one of the questions addressed.

[401 Chaos]

This is a question I've had in the past and not been able to find much information so I'm looking forward to the ASPA response as well. Also, what about a 1,000 Hour of Service requirement--any need to prorate that for 3/4 a year if the plan terminates as of 9/30? Thanks.

[Blinky the 3-eyed Fish]

No.

[R. Butler]

Also, what about a 1,000 Hour of Service requirement--any need to prorate that for 3/4 a year if the plan terminates as of 9/30? Thanks.

Again I think the point that needs to be remembered is that the termination date is not necessarily the last day of the plan year. Absent of some other amendment the last day of the plan year is still 12/31 (assuming calendar year).

[401 Chaos]

Thanks, Mr. Butler. I appreciate that there is a difference between the "termination" date and the last day of the plan year. Should I read your response to suggest that you must continue to count service "earned" after the 9/30 "termination" date through the end of the Plan Year for purposes of the 1,000 Hour requirement. That would seem to undercut the very notion that the plan has terminated. Blinky's responses (this one and his helpful response to my earlier post) make sense to me--namely that there is nothing forcing you to prorate or honor such requirements when the plan terminates midyear absent a specific amendment to the plan changing these limits.