Terminate Safe Harbor Plan Mid Year

[goldtpa]

A client with a Safe Harbor 401(k) is going out of business. They use the basic match ($4$ up to 3% and 50% on the next 2% of comp). No other contributions have been made to the plan other than the match.

If the company provides everyone with a notice that the plan is terminating, I think the company has to do the ADP/ACP test. Since they have gotten a free ride on the top heavy issue, do they now have to make a 3% top heavy contribution?

[WDIK]

It is my understanding that if the plan does not meet the safe harbor matching definition, you must provide any required top-heavy contributions.

This thread may also be of interest.

[goldtpa]

Thanks. I thought that was the case but i wanted to be sure.