Another Safe Harbor/Top Heavy Question

[Guest wayneiser]

My client has a super Top Heavy Defined Benefit Plan (12/31 YE). They ceased accruals and froze the plan in 2003. The DB plan may be terminated by 12/31/2004 YE or, since plan is underfunded, plan may be continued for funding purposes only. Can the client install a Safe Harbor 401(k) with the 4% SH match formula in 2004 and be exempt from making TH minimums for 2004? Also, if no NCHE's defer can the HCE's still put in the $13,000 deferral and not receive a match because no NCHE received a match?

[Archimage]

Your plan would be exempt from the top heavy minimum and your HCEs can defer the 402g limits without having to worry about what the NHCEs are deferring. However, if they decide to make a profit sharing contribution then you will lose your TH exemption.