Top Heavy Testing

[helloobb]

Did the Age 70.5 Required Minimum Distribution count as the in-service distributions when we are doing the top heavy testing?

Also, what kind of distributions we treated as the in-service distributions?

[Tom Poje]

well Code Section 416(3)(B) says

In the case of any distribution made for a reason other than severance from employment, death, or disability subparagraph (A) shall be applied by substituting "5 year period" for "1 year period"

no exceptions are listed for active employees that I have been able to find.

[My 2 cents]

I go on the assumption that payments to active employees for such things as minimum distributions or plan termination distributions are exactly the sorts of amounts that the rules were drafted to require adding back in.

[pjbaer]

I have two plans that will require a top heavy test:

Plan A started October 1, 2014. The key employees are the owner and his wife. The wife was not taking wages prior to the opening of the 401(k) plan on October 1, 2014. Is she included or excluded for the top heavy test?

Plan B has an owner, her husband is the office manager and the husband's adult son from another marriage works there as well. He was not adopted by the owner, he is a step son, is he included or excluded from the top heavy test?

[chc93]

Unless I'm missing something...

Plan A. Including or excluding is not relevant. Total account balance for key employees is used.

Plan B. Owner and husband are key employees. I don't think the owner's step-son is a key employee, and his account balance is included with all other non-key employees.