Top Heavy and Key employees

[Lori H]

What is the reasoning behind the regs counting a Key employees balance going towards Top Heavy status even after the Key has been paid out? The Key is still employed but is no longer participating.

[Tom Poje]

well, since I wrote the regs, I can tell you the reason...

oh wait, I'm out of my mind.

let's pretend everything is the same in your example except for the fact the Key person is still participating.

Then every year he gets a contribution, takes an in service distribution and the plan would never be top heavy, thus beating the system.

If there are no other key employees, then it is a moot point because the top heavy (at least in the DC world) is based on how much contribution the key person received, which would be 0.

[Lori H]

thank you.