Top Heavy Contribution in 401(k) Plan

[Guest ryler]

I am working on a plan that is top heavy for the 2003 plan year. Only deferrals were made. The plan did not pass the ADP test, and refunds have already been made.

All the information we have says that the company will still need to make a 3% top heavy contribution to all non-key employees. Since the company amended their plan to take out safe harbor so that they would not be tied into making a contribution, does anyone know of any exceptions to the top heavy rule?

Thank you!

[Archimage]

There is no other exception. They will have to make the top heavy minimum contribution of 3% unless the highest key deferral % is less than 3%.

[Guest ryler]

That is the answer I thought I would get - but not the one I was hoping to get!

This may be obvious to all but me, but how does this rule make sense when there are only deferrals? The HCE's are already limited in the amount they can defer and have to receive refunds.

[Tom Poje]

I gnore

R easonable

S ense

[Archimage]

What Tom said.

[david rigby]

Don't blame the messenger.

If "pro" is the opposite of "con", what is the opposite of progress?

[Guest welcomehome]

What if the HCE made no deferrals but one of their wives did? Do they still need to make a TH contribution?

[Archimage]

In that case one of the HCEs did make deferrals, the wife. So the answer to your question is yes they would have to make a top heavy contribution.

[Guest welcomehome]

What if they didn't make the TH contribution? What are the ramifications?

[Tom Poje]

careful of mixing up the terms.

HCE and Key ees.

if hubby is simply an HCE because of comp, but is not Key (e.g. not owner) then wife is not key,then no top heavy due as result of her.

ramifications: SCP allows self correction for missed top heavy. see Appnedix A, .02 (at least in rev proc 2002-47. my most recent copy of the self correction program is buried somewhere)

[Archimage]

Yep, wasn't thinking. What Tom said.