top heavy

[Guest lskin]

Can someone tell me how to determine the 20% rule for top heavy testing. If you have 10 eligible particpants of which 5 are key (4 owners and the other a highly paid officer). I think you take 20% of 10 which is two. Then do you choose the two highest paid key participants who are defined as key employees? Or do all of the owners have to be considered (meaning all 5 keys would have to be considered)?.

[Guest Pensions in Paradise]

I think you're talking about apples and oranges. The top paid group election applies when determining highly compensated employees, not key employees. So the top paid group election has nothing to do with the top heavy test.

[Archimage]

You are getting the HCE definition mixed up with the key employee definition. Top paid group is used to determine HCEs, not key employees.

[Guest lskin]

Thank you. I suppose then that is used for ACP and ADP testing. Sorry about that

[Tom Poje]

there is the officer test - which is 10% of number of employees or 3 (if greater). max # of officers = 50. always round up.

If I recall, it is not 10% of eligible participants, but 10% of non excludable bodies (e.g. someone who worked 6 months might be ineligible for the plan but would be counted)

regardless, in your case, if you have at least 3 officers making more than 130,000 then you would have 3 key ees due to officer status. rank them by comp.

but that is officer key. you still have ownership key. the ees could fall in more than 1 group.