Multiple top heavy years

[lexi]

Someone already posted a similar question but I can't find the thread, so forgive my duplication.

I read Rev. Proc. 2004-13 re how a plan that is courting top heavy status can make safe harbor contributions and avoid application of 416's rules.

However, is it possible for a plan that was top heavy in, for example, 2005 and in 2006 to use the safe harbor contributions for PYE 2006 and avoid 416 for that plan year? I know that top heavy status is determined on a year-to-year basis but can you use 2004-13 in a subsequent year without having first corrected a prior top heavy year?

thanks for any insight.

[Jim Chad]

I am confused by the question.

If a Plan's only Employer contributions for a Plan Year is the Safe Harbor contributions (either SHNEC or SHMAC) and not forfeitures The Plan is deemed not Top Heavy that year no matter what the percentage was as of the previous 12-31.

If this doesn't help you, Please clarify. Perhaps you could tell me TH percentage for 12-31-04, 12-31-05?

[lexi]

Sorry for my poorly worded post. This is what happened:

2006= plan year is top heavy. nothing is done to correct it.

End of 2006, someone buys the company and assumes the top heavy plan.

2007= new owner wants to make safe harbor contributions for PY 2007. however, 2006's top heavy status hasn't been fixed yet.

is there something that would prevent the ER from making SH contributions in 2007 to avoid top heavy rules for that plan year while trying to fix 2006?

i know that the top heavy rules are applied on a year-to-year basis, so it seems like just because you haven't fixed a plan for a prior top heavy year wouldn't necessarily mean that you couldn't take advantage of the safe harbor matching rules for the subsequent plan year.

how do two successive years of top heavy status interact with rev. rul. 2004-13.

any thoughts?

[Jim Chad]

If this is a calendar year Plan, it is too late to make the Plan Safe Harbor for 2007. But you could do it for 2008.

Now let's see if I have this right. 12-31-05 Key percentage is over 60% so the Plan is TH for the 2006 year. Yes, you do need to put in the Top Heavy Minimum contribution for every Participant employed on the last day. If the document allows, you can skip anyone not employed on last day.

If TH percentage for 12-31-06 is also over 60% than the Plan is TH for 2007 and at the end of the year a TH contrib will need to be made.

Hope this helps.