Top-Heavy Minimum

[Debbie Rath]

Is a top-heavy contribution required to the non-owner HCE based on the following?

• 401(k) plan.
• 3% non-elective safe harbor contribution with excludes key employees and HCEs.
• Non-owner HCEs are making deferrals but excluded from all employer contributions in plan document..
• Plan is top-heavy.

[BG5150]

Non-key HCEs must still get TH.

[Tom Poje]

my understanding is the plan is still 'not top heavy'

the Code indicates

A top-heavy plan does not include a plan for any year that it consists solely of a cash or deferred arrangement which meets the "safe-harbor" requirements under IRC 401(k)(12) for minimum contributions for participants and makes matching contributions that meet IRC 401(m)(11). See IRC 416(g)(4)(H).

now, if the plan included otherwise excludables who did not get safe harbor, then the plan is top heavy because a portion of the plan does not meet safe harbor. but I don't think there is a similar rule if HCEs are excluded from safe harbor.

basically, 1. safe harbor is required for all eligible NHCEs

2. HCEs can thus be excluded

3. since your plan met the safe harbor contributions and no other contributions were made it meets the top heavy exemption.

[Mike Preston]

46 minutes ago, Tom Poje said:

my understanding is the plan is still 'not top heavy'

the Code indicates

A top-heavy plan does not include a plan for any year that it consists solely of a cash or deferred arrangement which meets the "safe-harbor" requirements under IRC 401(k)(12) for minimum contributions for participants and makes matching contributions that meet IRC 401(m)(11). See IRC 416(g)(4)(H).

now, if the plan included otherwise excludables who did not get safe harbor, then the plan is top heavy because a portion of the plan does not meet safe harbor. but I don't think there is a similar rule if HCEs are excluded from safe harbor.

basically, 1. safe harbor is required for all eligible NHCEs

2. HCEs can thus be excluded

3. since your plan met the safe harbor contributions and no other contributions were made it meets the top heavy exemption.

Even if one of the keys is a nhce? 

[Tom Poje]

but that is different because now you have an nhce who didn't receive under point 1

[401_noob]

But how is someone going to be Key but not HCE? 

Never mind,  an officer can be hired in the current year with no look back comp in the previous year to make them HCE, so i answered my own question. 

[401_noob]

FWIW, I agree with Tom and this ASPPA presentation confirms that the SH contribution doesn't have to be provided to the HCEs in order to be exempt (slide 83 on page 42).

https://www.asppa.org/Portals/2/06-11-14 Presentation.pdf