Safe Harbor plan and Top Heavy

[Guest EPS2]

Safe Harbor Plan in 2006 (calendar year plan).

Determination date for Top Heavy 12/31/06, and just a smigid over 60% belongs to the key person

Sponsor of plan cannot afford to keep the plan a SH plan for 2007, so the plan is amended to stop SH.

Does he need to make the Top Heavy minimum even though the determination year was a SH year?

I can't find anything that discusses this issue. Is there anything he can do?

Any help is appreciated.

Thanks

[Guest EPS2]

Okay... I need to add something here.

Maybe the plan isn't Top Heavy after all.

I just checked the actual statement balances that do not include the receivable contributions for that determination year (contributions that had not been deposited as of the valuation date), and I found that after calculating Top Heavy it brings the key person down to 57.98%. So the plan isn't Top Heavy for 2007, and minimum contributions do not have to be met.

Does this sound right to everyone else?

We use Relius, and it does not seem to have a distinction between what is receivable and what is not, so everything is lumped in to the ending balances, which causes those receivable amounts to be counted. When the Top Heavy test is run it looks as if the plan is Top Heavy.

It's been one of those days...aaarrggg

[Tom Poje]

EPS2:

on Relius, in plan specs, there is a date box on the top heavy screen that can be set:

include contributions with a trade date on or before: _____________

that might help!

[Bird]

Back to the original question

Does he need to make the Top Heavy minimum even though the determination year was a SH year?

I believe the answer is "no." I don't believe the fact that the determination year was a SH year has any relevance.

As far as determining top heavy, there was a thread (or threads) on including receivables. I have it in my head that the IRS has stated that you DO include receivables, despite the language in the regs that appears to say otherwise. I'll leave it to you (or others) to research it, but I thought it was worth throwing out there.