4k/ESOP Top Heavy aggregation

[Guest dannyoc13]

The employer added an ESOP plan effective 1/1/06 in addition to their existing 4k plan. The ESOP plan contains all the same employees as the 4k plan - including HCE's and key employees.

The profit sharing contribution for PYE 12/31/06 is being funded into the ESOP plan in the form of employer stock. When running the top heavy test at 12/31/06 - do I aggregate the plans?

I assume yes since key employees participated and benefitted in both - but am kind of confused by the regs.

Any thoughts would be appreciated.

[BeckyMiller]

It is my understanding....(that is always a dangerous term) that the guidance found in the top heavy regulations control. See the T provisions of IRC Reg. 1.416-1. The language in 54.4975-11 that says that any ESOP may not be combined with another plan for qualification purposes is generally considered to be subject to override by later regulations. So, you would aggregate. If top heavy, all plans must meet the vesting conditions of top heavy, but only one plan would need to meet the minimum contribution rate. But, this answer is worth what you are paying for it. I thought there was a ruling or something on this, but I could not readily turn it up.

[stephen]

FWIW, I agree with Becky's comments.

[John Feldt ERPA CPC QPA]

Also, check your plan documents, hopefully they were coordinated so that only one plan is required to give the Top Heavy minimum.