Top Heavy Contribution

[Guest jetfaninmn]

The only key employee of a 401(k) PS plan is now responsible for 80% of the plan assets. His contribution level is 0% on deferral and therfore 0% on match. He does not make a PS contribution plan. He has no intentions of ever contributing or giving his ee's more than a 1% match. As long as this is a fact, he has no top-heavy contribution to make. Is there any reason to go to a safe harbor format. He has been approached by another TPA telling him that because of his TH situation, it would be better for him to go SH.

[Leopurrd]

I don't see why he would want to go SH if he doesnt contribute much to his ee's - it would lock him into a required, fully vested contribution. as long as he doesnt benefit from the plan you don't have an issue. However, i'd look to see how forfeitures are used in the plan; if its allocated on comp, etc you could have a th issue. you may want to re-word to reduce in that situation.