Top Heavy - 3% Safe Harbor & Profit Sharing

[Guest jkrad]

A plan that we administer is top heavy. The client makes a 3% Non Elective contribution and also makes a profit sharing contribution. Will the 3% still satisfy the top heavy min even though a profit sharing contribution is made?

[wmyer]

The 3% nonelective can be used toward the topheavy contribution. Nonkeys must get 3% (or if lesser, the % that the key employees get) of their full-year 416 compensation, so if the 3% nonelective is given on a part-year compensation, for example, the topheavy may not be satisfied. Also, if the 3% is only given after 1 year or age 21, but deferrals are permitted with less of a wait or at a lower age, the topheavy may not have been satisfied.