Safe Harbor & Topheavy

[wmyer]

A Safe Harbor 401(k) plan that only has the non-elective or the match, and no profit sharing contributions, is deemed a non-topheavy plan. If the employer also maintains a SEP with a 3-year wait, does this still hold true?

[Lynn Campbell]

http://benefitslink.com/IRS/revrul2004-13.pdf

This just came out today on Benefits Link and seems to answer your question. I do not think the SEP affects the top heavy status...does anyone disagree? Have you ever had profit sharing contributions? because if you have any forfeitures, that will require top heavy contributions.

[Tom Poje]

A SEP is subject to the top heavy rules

There is no free ride on these plans

If the key ee participates in both plans then they must be aggregated

My logic (maybe illogic) says the following:

therefore you lose free ride on top-heavy. I don't think it even matters if a SEP contribution is made, once a key ee makes deferrals

I don't think the 3 year has any effect. that would seem to be no different than example 4 in which there is immediate eligibility for deferral and 1 year wait for the safe harbor piece in the rev ruling cited

[Guest InfoSeeker]

Additional question on this topic. Same situation, I have a Safe Harbor 401(k) with match provision. The Plan also has rollover dollars for Key EEs from a prior SIMPLE-IRA arrangement. I realize that SIMPLE-IRA dollars are not included for Top Heavy purposes, but does the fact that the Plan has rollover dollars preclude it from the exemption provided under IRC 416(g)(4)(H)?