Top Heavy!

[Jilliandiz]

Profit Sharing Plan has a 2 year waiting period....if the plan is top heavy does an ineligible participant become eligible in the first year???

[Tom Poje]

top heavy only goes to those eligible for the plan as a whole, if plan contains a 401(k) and the people you refer to are eligible for that, then yes, you would have to provide them a top heavy.

[Jilliandiz]

Its only a profit sharing plan...hire date 11/11/02, 2 year service would bring the ee in at 1/1/05..if the plan is TH in 2004, does the ee get TH contribution in 2004?

[Blinky the 3-eyed Fish]

Your can hang your hat on the fact that if an employee is not a participant in the plan they do not receive a contribution, ever. If the plan is only a profit sharing plan, i.e., it does not have a 401(k) feature which would require 1 YOS eligibility for that piece, then this person is not a participant and receives nothing.

[Tom Poje]

lets reexamine this one, and depending on your document what eligibility is you may have an unintended situation

ee hired 11/11/02 assuming he is full time the following could occur

11/11/02 - 11/11/03 ee gets credit for one year of service.

if document says plan switches from anniverarry date to plan year for determining service then

1/1/03 - 12/31/03 ee gets credit for one year of service.

Therefore ee has '2 years' and enters 1/1/04, so instead of being ineligible, ee is actually eligible.

yes, that doesn't seem fair, but you have to be careful when you require 2 years of service.