top heavy testing

[Guest joe9pension]

Is there any requirement that top heavy testing be done annually? For a plan that has close to 100 participants, if the ratio was considerably less than 60% last year, can that be relied on for this year? For three years? If so, is there a citation in the regs you can give me. Thanks.

[AndyH]

Annually, unless you amend the plan to provide the top heavy benefits, vesting, etc. and deem it to be top heavy.

[rcline46]

If you actually read the 416 regs, there is no requirement to ever do a Top Heavy test. There are only consequences if the plan is Top Heavy. SO we all run the tests to avoid the problems if we miss Top Heavy.

Of course you could do as AndyH suggests and assume the plan to be Top Heavy, that is allowed under the regs.

The question is - what is the cost for doing the test? If you are being charged, or are charging for the Top Heavy test separately then that is a horse of a different color.

[AndyH]

I have to respectfully disagree. I think there are consequences either way if you do not test annually, unless the plan document explicitly provides for the top heavy benefits and vesting automatically regardless of top heavy status.

If you provide top heavy benefits and the plan is not top heavy or the plan does not have automatic top heavy provisions, the deduction could be overstated. In addition, it could be an operational failure of failing to follow the terms of the plan.

I know of at least one IRS audit years ago that the auditor expressed the first argument; I think it makes sense (or at least did pre-PPA). The second is my opinion.