Top Heavy For Employee Who Waived

[goldtpa]

I have a top heavy psp 401k plan with an ee who has waived participation. The plan has 2 owners and 3 nhces. 1 of the nhces has waived. The plan fails the 70% test but passes the avg benefit test. Does the ee who has waived get a top heavy contribution?

Thanks.

[Guest Sieve]

I believe the answer is No. Only participants at the end of the year who are non-keys are required to receive a TH contribution--and this individual does not participate. But, you need to see what the document says (since, e.g., some documents include key e'ees in the TH allocation).

[rcline46]

Did the employee sign a waiver to never ever participate, or merely decline to make deferrals? Thre is a HUMONGUS difference in the two actions.

[Guest Sieve]

I assumed that the OP's use of "waived participation" meant a one-time waiver out of plan coverage--perhaps a dangerous assumption. You're right, though, that a mere waiver from deferring (i.e., deciding to defer 0%, but not opting out of the plan forever) would cause that employee (who would then be a plan participant) to be required to receive a TH contribution.