Top heavy contribution needed?

[Bird]

Maybe I am overthinking this but I am stuck.

I have a dentist, A, who owned half of the AB practice on 12/31/15. The plan is top heavy. He bought the other half as of 1/1/16 (stock sale).

He owned all of the A practice on 12/31/15, and still owns it. That plan is not top heavy.

The plans are maintained separately, at least through the end of 2016.

If he makes deferral contributions to the A plan, does that trigger top heavy to AB?

[Belgarath]

With no research, I'd say probably yes - I assume the AB plan has at least one employee participating? If so, both plans are part of the required aggregation group for TH purposes, since at least one key employee participates in both.

But I'd have to do a little checking to be sure...although I should probably remember this off the top of my head, I don't...

[duckthing]

With no research, I'd say probably yes - I assume the AB plan has at least one employee participating? If so, both plans are part of the required aggregation group for TH purposes, since at least one key employee participates in both.

But I'd have to do a little checking to be sure...although I should probably remember this off the top of my head, I don't...

According to EOB the answer (with that assumption) is yes. Chapter 3, Section IV (don't remember the subsection off the top of my head... B maybe?). They do give a specific example about the situation where no contribution is made to one of two DC plans in a required aggregation group. I don't see this specifically addressed in the code anywhere, but this seems like the conservative approach at any rate.

Hopefully this counts as enough 'research' to not be a "me too" post!

[Bird]

Thanks! We'll play it safe and allocate 3% no matter what.

[Kevin C]

I disagree. I read 1.416-1 T-6 as saying the determination of which companies are in the required aggregation group is made as of the "determination date", which is the date used for the TH calculation. The EOB says while not expressly stated in the regulations, it is assumed the required aggregation group is determined as of the determination date and says the IRS agreed with this interpretation at the 2011 ASPPA annual conference Q&As. It also has an example (4.a) with an acquired group being added to a controlled group in 4. Related Employers under the definition of Required Aggregation Group. It has a stock purchase of a company with a plan happening in 2013 and says for 2013, the TH status is determined separately for each plan since the companies were not related on the 12/31/2012 determination date used for the 2013 year. For 2014, they are part of a required aggregation group and are tested together.

If you don't agree with that interpretation, treating both plans as being part of a required aggregation group would also require including both plans in the TH test to determine TH status.

[Bird]

Thanks. If we just do 3% as an employer contribution in both plans then we're ok either way and that is what he wants to do anyway.