In-Service Distribution: Unrelated Rollover

[Guest 4Kicks]

Top Heavy Test: I understand unrelated rollovers are excluded from the amount of the participant's account balance as of the determination date. But what about subsequent transactions (in-service withdrawals of rollover money) associated with those dollars? Do these transactions get added back? Plan Document allows for in-service withdraw of rollovers. Example:

PPT Jones deposits an unrelated rollover of $100,000 into Plan A on 7/1/2011. Jones takes an in-service withdrawal of rollover of $50,000 from the plan on 7/1/2012. Jones does not contribute deferrral and has received no employer contributions. As of the determination date of 12/31/2012, Jones has an account balance of $50,000.

Question:

1. Would Jones be reflected as having an account balance for the top heavy calculation of $50,000? (account balance as of 12/31/2012 $50,000 minus $50,000 unrelated rollover attributable to account balance + $50,000 five year inservice withdrawal rule ) OR

2. Would Jones be reflected as having an account balance for the top heavy calculation of $0.00? (account balance as of 12/31/2012 $50,000 minus $50,000 unrelated rollover attributable to account balance and no reflection of in-service as it was part of an unrelated rollover)

Thank you in advance for your opinions.

[Lou S.]

Ignore the unrelated rollover source for top-heavy. Ignore it for end balance and ignore any distributions from that source.