Senior moment

[thepensionmaven]

Client maintains a safe harbor 401K, which as amended 1/1/2014 to a traditional, tested 401K.

The employer has more than 60% of the value of the plan, so the plan is top heavy, but employer is not deferring and does not want to contribute for the employees, now or in the future.

If memory serves me correctly, as long as there is no employer contribution, he is not obligated to make the 3% top-heavy contribution???

[MoJo]

Is the owner the only Key Employee for top heavy purposes? If their are other Key Employees who defer - then a top heavy contribution would be required

[Lou S.]

you and mojo have it correct but for completeness the TH minimum in a DC only scenario is non-keys get the lessor of 3% of pay or the highest allocation rate of any key ee (allocation rate includes 401(k), er contribs and forf realloc). If all keys are getting 0% then that is the highest allocation rate and no TH min is required even if plan is TH.

Though it does bring up a potential question about "complete discontinuance of employer contributions" in the context of partial plan termination. Though that's a different question entirely.

[ESOP Guy]

I has been a while since I have had a plan small enough to worry about TH issues but I believe if the Key gets a forfeiture allocation that counts.

As Lou said if the rate of allocation for everyone is the lessor of 3% or the highest allocation still no problem.

So if the forfeitures are allocated on compensation/total compensation it should be ok but don't lose track of those forfeitures-- if I recall correctly.

[thepensionmaven]

No other key employees.

Highest allocation rate would be 0%.

[thepensionmaven]

I assume that if the key employee matches the employee's contribution, even if he is not contributing, the results are the same, meaning no TH contribution

[Tom Poje]

correct, if the key person gets nothing (no deferrals, match, ps, forf) then there is no top heavy required.)