Top Heavy Contribution -- 3% of Which Year's Comp?

[Guest mrjones]

For example, a calendar year plan is tested as of its 12/31/2013 determination date, and is determined to be top heavy. Which year's Non-key Employee compensations are used for calculation of the top heavy minimum contribution...2013's or 2014's?

Thanks

[Tom Poje]

the plan will need to provide a top heavy benefit in 2014, depending on what the key employees receive as contributions in 2014.

if 2013 is the first year of the plan, then since you have nothing from the prior year, so you use 12/31/2013 to determine if 2013 is top heavy and provide a top heavy in 2013 if needed, but that is the first year rule only.

[Guest mrjones]

Thanks. Just to confirm:

So based on the results of the 12/31/2013 test, the plan is Top Heavy in 2014 and therefore a TH contribution needs to be made using compenations etc from 2014....which essentially means that the TH contribution actually needs to be calculated and deposited during 2015?

[Tom Poje]

yes, that sounds correct. you won't know if someone is there on the last day until 2015 - well I guess you be clairvoyant and know both comp and if someone is going to be there on the last day.

(if plan is a safe harbor 401k plan and there are no other contributions, then no top heavy as well.

[david rigby]

Another source of information is the TH regs, 1.416-1.
In particular, see Q&A T22, and Q&A M7.