TOP HEAVY TEST

[Guest DP in CA]

HI,

We falied the TOP Heavy Test and we are required to pay the 3% non-elective contribution to the non-key employees.

Does the Company have to make the contribution? Are there other options?

Also, we failed the ADP/ACP test and the HCE were refunded the contribution. After the refunds, this would make the Top Heavy Test pass. Can the TOP heavy test be recalculated after the refunds?

How is TOP Heavy Test calculated before ACP refunds and after ACP refunds?

Sorry for so many questions. I am new to this and our TPA is not much of help.

Thanks in advance!

[Mike Preston]

Remember that the 3% non-elective is reduced by matching contributions, if the document provides.

Yes, the Company has to make the contribution; there are no other options short of determining that the plan is not really TH (sometimes there are differences between practitioners).

The top-heavy test would not be recalculated. However, this scares me a bit. Except in the case of a new plan, the date that is used to determine whether the plan is topheavy is the last day of the prior calendar year. Hence, you would generally look at the balances at 12/31/2004 to determine whether your plan was top-heavy for 2005. If you are even contemplating making a change to the TH test based on refunds for 2005, you are a year off on your thinking, maybe.

Refunds of deferrals (ADP) or matching contributions (ACP) do not impact the test.

If your TPA is not much help you need a new TPA.

[david rigby]

There may be another option, at least with respect to testing. Have you determined whether there is/should be/could be other plans to aggregate for TH testing?

[Guest WWPDRC]

I agree with Mike, looks like you may need a new TPA. Hey, I'm a TPA