Safe Harbor plans and top heavy

[Guest rffahey]

I am getting mixed messages from TPA's. I thought that a 3% safe harbor plan that has no other contributions ( or forfeitures ) from the employer other than the 3 % safe harbor contribution is exempt from the top heavy rules.

This means that an employee entering a calandar year plan on 7/1 only gets the 3% safe harbor on 7/1 to 12/31 compensation. They do NOT get a top heavy allocation for the whole year comp since the plan is exempt.

However if the plan does have a profit sharing allocation ( or just a forfeiture allocation ! ) it is no longer exempt and if it is top heavy than the person avove would get a TH allocation based on full year wages.

Please confirm and clarily and many thanks !!

[WDIK]

Here is one prior discussion. You can find a number of others if you want to use the search feature.

[jquazza]

rrfahey,

You got it right, if the plan consists solely of deferrals and the safe harbor contribution, your plan is not top heavy even though the plan's top heavy ratio might exceed 60% (IRC§ 416(g)(4)(H).)