Question on Top-Hat Plan and 409A

[Madison71]

A top-hat plan was set-up several years ago. The plan appears in form to be drafted in compliance with 409A and only for a select group of management or highly compensated employees. Notification was filed with the DOL on this plan. In operation, there are some participants who are management, but there are other participants in the plan whose ($50,000) is barely above the average of all employees. The employer said he selects the employees he wants to include not on whether or not the are management or a highly paid employee, but on whether or not they might leave. The employees elect whether or not the want to participate in the plan prior to the beginning of the year in which the contribution is made. I know there would be negative tax consequences to ineligible participants, but was 409A also violated for these participants, and if so, on what basis?

Thank you so much for any guidance you can provide.

[QDROphile]

The exemption from the ERISA pension plan requirements is not directly related to section 409A. The first concern is violation of ERISA. If the plan is an ERISA pension plan and not exempt, then the things that must be done to comply with ERISA, such as funding and maintaining a trust, would be incompatible with section 409A requirements. If you can live with the ERISA noncompliance, section 409A does not care who is covered.