Top Heavy to participants excluded from PS ?

[Cynchbeast]

We have a PS/401(k) plan that only had deferrals and SH match prior to 2015. Starting in 2015, the plan was amended and excluded classes were added to the adoption agreement. So now, we have existing participants who are already in the 401(k). The plan is top heavy.

Q1 - if we exclude people from only the PS portion, do we still have to give those 401(k) participants a top heavy minimum?

Q1.1 - If yes, one of them deferred and so received 4% SH match. Will that not satisfy the TH minimum for that person?

Q2 - If we exclude people from the entire plan - both PS and 401(k) components - what do we do about top heavy with respect to those people who are already plan participants (entered plan prior to adoption of exclusions) but who now are in the excluded class?

[Mike Preston]

1. Yes

2. Yes, if document is properly drafted. What does your document say?

3. Nothing, they are not entitled to a top-heavy minimum. Of course, your document can't say something different. Does it?

[Cynchbeast]

Thank you - your response was concise and very helpful.

Now about how to correct this. Actually, I was wrong about year - this was all for 2014 - the 5500 was already timely filed, but with incorrect contribution. So we will amend - and show additional TH contributions as receivable.

1. Since this is for 2014, the additional due would be non-deductible for 2014, correct?

2. Since we are still before deadline for 2015 contributions (03/15/16), can this be deductible for 2015?

[BG5150]

1. Right

2. I would think they are 2016 contributions, subject to the 2016 Annual Additions limit.

Is this a large-plan filer? Is it a lot of money?

If large plan, I would jsut add a footnote to the 2016 audit if it's an insigificant amount.

As an SF, I'd just add it as a 2016 contribution, b/c that's the year it's deductible for. (see my "thought" in #2.)