Top Heavy Minimum covered by Matching Contributions

[dmb]

Can someone help interpret the answer to Question M-19 under 1.416-1 regarding matching contributions treated as minimum top heavy allocations? The last sentence of the answer states that the contributions must meet the nondiscrimination requirements of 401(a)(4) without regard to 401(m). If a plan provides a 50% of deferral match up to 6% of comp in a traditional 401(k) plan, i assume that this meets 401(a)(4) because it is a unifiorm formula and is not discriminatory, but after reading the Q&A of M-19, i'm not so sure that the match doesn't have to be general tested. Thanks.

[Tom Poje]

in the old days if matching contributions were used to satisfy top heavy, you could not use them in the ACP test, as you so wisely note in the reg you cited.

however, EGTRRA changed the rules, and the reg you have noted only applies for plan years before 1/1/2002, so unless you are trapped in a time warp don't worry about it.

[Belgarath]

Tom - what if a non-key HC gets a TH contribution? Sal has some discussion of this TH uniformity requirement on pages 9.20 and 9.21, and see specifically page 9.21, 5.d.5) of his 2006 edition. How do you read this? Still no worries, or do you think general testing might be required in certain circumstances?

[Tom Poje]

ah, I read the original question as being about the ACP test (e.g. you cant use 'top heavy match in the ACP'

and that since EGTRRA, M-19 has been overridden.

personally I think you could have problems with 401(a)(4) testing in the case of any HCE (whether key or non-key depending on the document) who receives any nonelective to satisfy top-heavy.

Taking it one step further, suppose you have a plan that requires cross testing. One ee failed 1000 hours requirement, but received 3% match so satisfied top-heavy. for rate group testing I don't see how you could treat this in testing. but interesting question.