top heavy with ee deferral

[Guest pensiondoc]

What to do if a participant defers 20% and the plan is top heavy? The document says that, in order not to have an excess allocation, 'er contributions are reduced. Does this mean the participant does not get a top heavy contribution?

[Ervin Barham]

Is this for a plan year beginning after 12/31/97? If it is, the new 415 rules kick in and you don't reduce the comp, so the participant would be receiving 23%.

If this is not, this is one of those where there is no "correct answer". My information is that you could probably return enough of the 401(k) deferral to allow the participant to receive the top heavy contribution.

You can look at Treas Reg 1.415-(6)(B)(6)(i)to see if that helps.

I hope this helps.