Top Heavy in Multiple Employer Plans

[rcline46]

Put your thinking caps on - Multiple Employer Plan, and of course a Key Employer draws pay from both employers.

Payroll records shows he deferred and received a match from only one employer.

The question is, do we use his balance in the Top Heavy test for only the employer from which he recevied the match (and made his deferral), or do we include his balance in both tests?

Or maybe we prorate his balance based on his (average) pay from each employer?

Thanks all for your ideas (and cites if there are any).

[pmacduff]

I administer a PEO MEP plan (which BTW has been audited by the IRS 3 times.) The top heavy testing is done on each individual employer. I assume from your post that there are only 2 Employers within the MEP; therefore no controlled group or else you wouldn't have needed a MEP.

There are employees (some key) that are under more than one entity in the MEP I administer. So...each employer is tested on the information (i.e. wages, balances, etc.) for only that one employer. Can get kind of crazy if the individual's balance is not segregated between the 2 employers. You'd want to be sure that was tracked somehow even if outside the pension software on a spreadsheet or something similar.

I think you can find a lot of cites in Derrin Watson's "Who's the Employer" book. There is also info on this website under Derrin's Q&A section which I have found to be VERY helpful.