Top Heavy Question

[kocak]

Four doctors each own 25% of a medical practice. They have a Profit Sharing Plan. They terminate the plan and sell their practice to Company A in 1996.

All assets are distributed from the plan in 1998. In 1999 four doctors buy the medical practice from Company A, each with 25% ownership. Three of these doctors are the original owners.

The new owners want to start a 401(k) plan. I'm having trouble deciding whether I need to include the prior PSP in my top heavy calculations. Any ideas?

thanks

mck

[Guest GG]

You will need to aggregate all employers under Code Sections 414(B), 414© and 414(m) for purposes of Top Heavy testing.

You also have a required aggregation group that includes each plan of the employer in which a Key employee participates during the plan year containing the determination date or any of the four preceding plan years.

So, it appears you would have to include the prior terminated plan for purposes of Top Heavy testing in 1999.

[Guest GG]

I neglected to mention that you first need to determine if you have a group of related companies. Your data was not sufficient for me to make that determination. However, assuming that companies are related, you will need to aggregate for testing. Sorry about that.