Guest rffahey Posted January 10, 2005 Posted January 10, 2005 I am getting mixed messages from TPA's. I thought that a 3% safe harbor plan that ns NO other contributions ( or forfeitures ) from the employer is EXEMPT from the top heavy rules that year. Is this correct ? THis means that an employee entering a calandar year plan on 7/1/04 for example only gets the safe harbor 3% on comp from 7/1/04 to 12/31/04. They do NOT get a top heavy allocation for the whole year comp since the plan is exempt. Is this correct ? If the plan in some future year has a profit sharing allocation OR a forfeiture ( that is allocated like a profit sharing allocation ) then is not exempt that year and the 3% top heavy on the WHOLE year must be contributed for a person that enters on July 1st - correct ?
david rigby Posted January 10, 2005 Posted January 10, 2005 Was this response insufficient? http://benefitslink.com/boards/index.php?showtopic=27390 I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Guest rffahey Posted January 10, 2005 Posted January 10, 2005 Thanks -- but it was not the detailed answer that I was hoping for. I could use more clarification.
Blinky the 3-eyed Fish Posted January 10, 2005 Posted January 10, 2005 Third time's the charm? The post referenced in the post referenced by pax, when you asked this question last year provides the details. In short, you don't need to provide the TH min if the only contribution is a SH contribution and if there are no forfeitures. Read Rev. Rul. 2004-13. "What's in the big salad?" "Big lettuce, big carrots, tomatoes like volleyballs."
Guest rffahey Posted January 11, 2005 Posted January 11, 2005 OK, That settles that !! Now what if there are a small amout of forfeitures ? What does that do to us ?? Also, What if this was a safe harbor plan using the matching formula - how would the answers above change in this scenario ?
austin3515 Posted January 12, 2005 Posted January 12, 2005 The ruling is only 2 pages, and written in a very straight-forward manner... http://www.unclefed.com/Tax-Bulls/2004/rr04-13.pdf 1) Forfeitures = NO top heavy exemption... 2) The answers do not change at all regardless of whether the SH plan uses the 3% SHNEC or the SH Match. Austin Powers, CPA, QPA, ERPA
FJR Posted February 16, 2005 Posted February 16, 2005 I was curious about this. What if you had a Safe Harbor Plan that was Top Heavy and you did pay someone out who ended up Forfeiting their non-vested balance? The question is normally you would have to allocate a 3% Top Heavy Min., but what if you were able to use the Forf. towards expenses first? Would this get you back to a free pass on TH?
austin3515 Posted February 16, 2005 Posted February 16, 2005 forfeitures for expenses are not allocations, so I'd say your out of a THM situation... Austin Powers, CPA, QPA, ERPA
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now