top heavy

[Guest quinn the car fixer]

401k CT P/S plan that excludes by job classification. Last year(12/31/02) ee was in an eligible job class and received contrib. as of 12/31/02 her job title changed and she is not eligible for any contrib's for 12/31/03. Plan is top heavy for the 2003 plan year. would she be elig for top heavy min ? if so why(i don't think so).

[jquazza]

Was she eligible for the 401(k) portion at any time during the year?

[Guest quinn the car fixer]

no, as of 12/31/02 her job descrip changed and she is not elig for any contrib's

[Guest Doug Goelz]

I've seen people argue on both sides.

I guess you just need to decide how you interpret what "participant" means under the top heavy regs. Specifically, the rules for determining who must receive the minimum allocation under a top heavy defined contribution plan are found in Treas. Reg. §1.416-1, M-10. Only a non-key employee who is a participant in the plan for the plan year is entitled to the minimum allocation.

If the employee has always been excluded, then I think it is clear that the employee is not a participant in the plan and would not be entitled to the

top heavy minimum allocation.

If the employee was once a participant but now is completely excluded from the plan (including right to defer), then I personally feel he/she is no longer a participant and does not need to receive the top heavy minimum. However, I know people that feel once a participant, always a participant, and they think the top heavy minimum would be required.

Best bet is to have an attorney make the call for you.

[Blinky the 3-eyed Fish]

I wonder who would argue that this participant is eligible for the TH minimum? Keep reading to Q&A M-12.

Q-12. What minimum contribution or benefit must be received by a non-key employee who participates in a top-heavy plan?

A-12. In the case of an employer maintaining only one plan, if such plan is a defined benefit plan, each non-key employee covered by that plan must receive the defined benefit minimum. If such plan is a defined contribution plan (including a target benefit plan), each non-key employee covered by the plan must receive the defined contribution minimum. In the case of an employer who maintains more than one plan, employees covered under only the defined benefit plan must receive the defined benefit minimum. Employees covered under only the defined contribution plan must receive the defined contribution minimum. .....

Clearly the employee is not covered by the plan. Best bet, save your money by reading the regs for free.