TH 401k Plan with New Comparability and Life Insurance - funding problems

[Guest mparker2028]

Our client has a Top Heavy 401(k) Profit Sharing Plan with a new comparability profit sharing formula. Onc employee out of the 7 HCE/Key employees has a life insurance policy in the Plan. This client traditionally makes large employer contributions to the Plan.

However, due to cutbacks in reimbursement for services (doctor group) by health insurance companies, they are in a crunch for cash. The plan sponsor has already paid the life insurance premium for the policy, which is about 4.57% of the HCE/Key ee's projected annual compensation. The sponsor has also funded about $25K (they advance fund during the year).

My first thought is that the client is on the hook for at the very least 3% for non keys and 4.57% for the remaining keys in the other HCE/Keys's group.

Is there any other way out of funding more than $25,000 based on the fact that the plan sponsor paid the life insurance premium ?

Thanks for any thoughts on this problems.

[Guest padmin]

Why not consider the premium paid and the 25,000 as the toal contribution and consider the excess premium payment as being paid out of the docs account.( Premium funded in part by existing account balance and contribution.

[Bird]

I agree with padmin. Treat it as if it had been two steps, a contribution (not earmarked) and then a premium payment from the doc's account.