Safe Harbor Plan Deemed not top heavy

[Lori Foresz]

I just want to confirm what I believe to be true.

A plan is a SH 401(k) plan that is top heavy. For the plan year, the only contribution made is the 3% NEC, however, DOP compensation is used so that several participants do not get 3% of full-year pay (required if the plan were considered for top heavy). I presume this is okay since the plan is treated as not top heavy.

However, if additional contribuitons were made, then the new entrants would need to get the 3% full top heavy contribution.

Can someone please confirm that this is how they understand it as well.

Many thank

[Tom Poje]

that sounds correct.

if the only contributions that were made were deferrals and safe harbors the plan is not top heavy.

it should not matter if DOP comp was used as that is an option.

If otherwise excludable option is used, and those ees do not receive the safe harbor then it is a different story.

[Lori Foresz]

Thanks. The otherwise excludable rule is not being used but that is an interesting point.

If that rule is used and otherwise excludables do not get the safe harbor, then the plan doesn't consist solely of SH contributions and the plan is top heavy. Then, the otherwise excludable group would have to get 3% of full comp (plus any not otherwise excludables with DOP comp less than full year comp) since the SHNEC would not need the top heavy contrib reqs.

But to satisy top heavy, would only those employed at EOY have to receive full 3%? If yes, then it may still save money for a SH top heavy plan to use the otherwise excludable rule and DOP comp.

Does that sound right?