Top Heavy Contribution Deadline

[Guest GG]

Assuming a plan year ending 12/31/98, what is the latest date the Top Heavy minimum contribution must be made to avoid plan disqualification?

Can someone provide a cite?

[Ervin Barham]

You don't say what kind of plan you have, but in my quick reading of the top heavy info I have readily available, I did not see anything specific. Absent any other guidelines, then the normal rules for making a contribution should apply.

You can check Treas Reg. 1.416 and the section on contributions to see the specifics of what you are looking for.

[Guest Danavjack]

The main issue with respect to top heavy minimums, is that the allocation/accrual must be reflect during the valuation for the year. Then, so long as the actual contributions are made within the time frames for deduction (sec. 404) and minimum funding (sec. 412) you should be fine. 416 itself does not impose any timing requirement for contributions It only specifies additional requirements for accruals/allocations. .

[John A]

I have heard that top-heavy contributions should be made by 12 months after the end of the plan year, on the basis that that is when other contributions not subject to 412 are due. Of course, the deduction timing rules of 404 still apply.

[Guest]

we had plan like that recently, due to cash flow problems, contribution was made 12/31/98 for plan year end 12/31/97.

deduction taken in 98 as a result, have to watch out for annual additions.

.

[Guest GG]

I'm somewhat amazed that this topic is alive again after 6 months ! I also remember "hearing somewhere" that the Top Heavy minimum contribution to a profit sharing plan could be made no later than the last day of the plan year following the plan year it was required. HOWEVER, I tend not to believe most of what I hear and prefer to have a cite.

Unfortunately, 416 does not appear to stipulate when the top heavy minimum contribution is due (i.e.: no more than 8 1/2 months after the plan year). We all of course know when the contribution must be made to the plan to be deductible, and counted for 415 purposes.

[John A]

I prefer to have a cite as well. When no cite exists, I like to have either informal guidance or good reasoning, which I thought I provided above. I am firmly convinced that there is no formal guidance. However, you may wish to look at Q&A 62 in the Benefits Link Correction of Plan Defects question. Since that Q&A, pertaining to correcting missing a top-heavy contribution, indicates that the "IRS Headquarters' officials have indicated that loast earnings must be calculated from (a) the date on which minimum contributions are 'deemed' to have been contributed", it would seem the IRS would have to give some guidance as to what the "deemed" date has to be.