top heavy and MEP

[AlbanyConsultant]

I thought I was right on this, but I'm looking at what the prior TPA did last year and it doesn't match up, so now I'm questioning myself...

MEP has immediate entry for deferrals and statutory (1 YOS/ semi-annual) for SHNEC and PS.  This particular adopting employer is top heavy by percentage but is choosing to only do the safe harbor this year.  This makes them exempt from the TH minimum, correct?  As in, those who are eligible for the deferral only (like those hired in 2022) don't need to get any allocation.  Just like any single-employer plan.

I was pretty sure of this until it came back to me that the TPA who did this calc for 2021 gave the 2021 hires a top heavy minimum for 2021 because they are top heavy (and they also did not do any profit sharing in 2021).  To me, that's an error and I don't intend to repeat it, but I figure I'd better double-check, so... is there something MEP-specific that I'm overlooking?

Thanks.

[401kology]

You may want to refer to Situation #4 in Rev. Ruling 2004-13 as it addresses the otherwise excludable employees and top heavy.  You do not get the top heavy exemption since some employees who are eligible do not get the safe harbor non-elective.  https://www.irs.gov/pub/irs-drop/rr-04-13.pdf

Also - Starting in 2024 (plan years after 12/31/2023), SECURE 2.0 changed the OOE rules and top heavy and the otherwise excludable employees are not required to receive the top heavy minimum.

[AlbanyConsultant]

Right - I always forget that part when the eligibility is different.  Thanks!