Top Heavy Minimums in Safe Harbor Match Plan with a DB

[drakecohen]

Must eligible employees (whether deferring or not) under a safe-harbor (match) 401K Plan receive a 5% top heavy minimum contribution if the employer also sponsors a defined benefit pension plan?

Can the safe-harbor match be applied toward the 5% top heavy obligation?

Thank you.

[Tom Poje]

416(g)(4)(H) is the part of the Code that says "Top Heavy Free" applies to a plan which solely consists of deferrals and safe harbor contributions.

then the last sentence has been interpreted to mean (at least as far as I understand)

"despite the fact the plan is top-heavy free, if it is a part of the aggregation group, you can apply those safe harbor contributions towards satisfying top heavy.

(assuming your document says you can use match to satisfy top heavy - by the way the original rules indicated match couldn't be used for top heavy, but that was back before any match could be used towards top heavy)

so now you have an eligible employee who is not deferring.

again, as far as I understand it, if there are no other contributions to the safe harbor plan, no top heavy.

but if this person is in the DB he still needs the top heavy in the DB. and if that hasn't been satisfied, and the plans indicate top heavy is made to the DC plan, then you have to make a contribution to the safe harbor and now you have lost the top heavy free.

If the person is not in the DB, then no top heavy because he is in a top heavy free plan (and it would only be 3% anyway because it's 5% only if you are in both plans, or at least that is what I recall)

[K2retire]

Excellent example of why a SHNE elective contribution might make more sense for these paired plans.