Top Heavy Issue

[Guest JDK]

We have a client who presently has a 401(K) with profit sharing and 3% non-elective safe harbor. The entry requirements are 1yos and age 21. The plan was amended on 1/1/08 to include prevailing wage contributions by participants who do prevailing wage jobs. The eligibility for this is immediate entry. Anyone hired by this company during 2008 would be in one sense eligible for the plan (prevailing wage) even though they don't work the job. The plan is considered top heavy without the safe harbor.

My question is since the participants who are not eligible for the 401(K) portion of the plan be entitled to a top heavy contribution since they are eligible for prevailing wage?

[GBurns]

I have not been involved in any recent PW or DBRA plans, so I am doing this from memory. But first, I suggest that you seek experienced legal advice about this and other issues peculiar to these plans..

DBRA and most, if not all, PW plans should not include employees who are not engaged in the job. Contribution levels, contribution sources, vesting etc are usually different from non-DBRA/PW.

The required audited payrolls should not include employees who are not engaged in the contracted job. Audiited payrolls are a usual requirement and will not "balance".

Edit: I think I should have said "certified" rather than "audited".