Top Heavy

[Guest babs51]

Company has a PSP. Started a 401(k) in 04 with another administrator that we did not know about at the time. When we found out about the new 401(k) plan, suggested they merge the PSP into the 401(k). Became aware the PSP is top heavy (on its own). Therefore, top heavy will be an issue for 04 and 05 for the 401(k) if any keys are deferring and since both plans are in effect - but if PSP were to be terminated, rather than merged, distributed by the end of 05 and no one's account rolled in to the new 401(k), how long does top heavy remain an issue on distributed money (mainly for keys)? Is timing any different than a distribution with a active/ongoing plan - one year?

[alanm]

seems like these would be in-service distributions and you keep them in the test for four years.

[JanetM]

What's so bad about top heavy? Make merged plan safe harbor with 3% non elec and you are don't fooling with it.