Restricting Deferrals in Top Heavy Plan

[Guest trumpy]

I had addressed a few unrelated plan issues recently that when considered together offered a possible solution for one of our clients. I wanted some input as to whether or not this was viable -

1.) Top Heavy 401(k) plan - husband & wife own the company (only HCEs & Key EEs).

2.) They do not defer into the plan to avoid having to make a top heavy contribution.

3.) Both are over age 50.

4.) ERISA Outline Book states that catch-up contributions are not considered in calculating the highest Key EE allocation percentage.

Question - Can we amend the plan to limit HCE deferrals to 0% and then have husband & wife defer the maximum catch-up contribution for the plan year and avoid having to make a top heavy contribution?

Just a thought

[Blinky the 3-eyed Fish]

Well, I think you mean to say that you want to limit KEY deferrals to 0% since you could have NHCE key employees. So you can surely do that and let the keys get their $4k or $5k each year.

[Guest trumpy]

Thanks for the response Blinky - I wanted to get some feedback whether others felt this would be overly aggressive.

[R. Butler]

May also want to consider whether a SIMPLE would be better.

[jquazza]

Not a bad idea.