Top Heavy questions

[Guest judyw]

The CFO of our company was not determined to be a key employee at the end of 2003 and therefore he did not trigger the 3% requirement for 2004. The question is for 2004 he will be a key employee and that will effect 2005.Therefore the 3% will be a factor. Short of stopping the contributions of the top heavy employees how can we as a company make this equitable for them?

[WDIK]

What types and amounts of contributions are currently being made by the employer?

Edit: Also, approximately how large would the 3% top-heavy contribution be?

[SoCalActuary]

3% contribution is modest if the company is profitable. Of course, CFO's push for highest profits, so they may want to go cheap on retirement benefits.

[mbozek]

If the benefit which triggers the TH contributon is salary reduction contributions why not have the CFO make contributions to a NQDC plan or provide for a SERP with an employer contribution ?

[jquazza]

Does the company provide other contributions (like a match.) If so, look into making the plan a Safe Harbor 401(k) using the match option. If it's the only ER contribution, the plan will be deemed not top heavy.

And by the way, do you know that the plan will be top heavy for sure? If only one key employee makes the plan top heavy, it's probably a small company with a low participation rate amongst non-key employees, so providing a SH match should not be too expensive.

If they are adamant about not providing benefits to their employees, a non-qualified plan will work.