Top heavy minimum and coverage

[S- Milwaukee]

Do you have to apply coverage testing to a Top heavy calc if is just the NON HCE particpants are suposed to be receiving the Top Heavy Minimum?

I had 2 HCE. One terminated during the year one is still there and DEFERRING.

[rcline46]

HCE has nothing to do with Top Heavy. It has to do with KEY and non-KEY. Frequently HCEs are also KEY but not always.

[Tom Poje]

well it becomes a moot point.

if only the non key employees receive a top heavy minimum, then the 401(a) portion of the plan benefits no HCEs and you get a free ride on coverage for that portion of the plan. of course, if you were to run the test, you would pass anyway.

assuming the HCE is a key employee, then top heavy is required at whatever % the HCE deferred, capped at 3%

[My 2 cents]

well it becomes a moot point.

if only the non key employees receive a top heavy minimum, then the 401(a) portion of the plan benefits no HCEs and you get a free ride on coverage for that portion of the plan. of course, if you were to run the test, you would pass anyway.

assuming the HCE is a key employee, then top heavy is required at whatever % the HCE deferred, capped at 3%

My understanding: Perhaps one of the HCEs is a commissioned salesman. If not an owner and not an executive officer, compensation of $500,000 per year does not make the salesman a key employee and so the salesman must receive a top-heavy minimum. Top-heavy minimums can be limited to non-keys but cannot be limited to non-HCEs. I believe that that's a matter of law, not plan design. So how can you exclude from the top-heavy minimum people who are HCEs but not key employees? Satisfaction of 416 and satisfaction of 401/410 are two separate things.

[S- Milwaukee]

Yes, I should have said Key employees.

Thanks! For some reason i was thinging that since my Key person was deferring, I had to make sure I was passing on coverage.