Top Heavy Plan and Adjustments to Year-End Balances

[Guest lforesz]

A Plan is top heavy for the PYE 12/31/2000 and will make a 3% contribution to all non-keys for the PYE 12/31/2000 on or before the due date for filing the 2000 tax return. Can we inlude this receivable contribution in employee balances as of 12/31/2000 for purposes of determining top heavy status for the PYE 12/31/01? Since the contribution is required, can we treat the Plan as if if were a plan subject to the funding requirements of 412 and include this contribuiton?

[Richard Anderson]

The answer is yes and no.

If the plan is a 401(k) plan that is top heavy and the HCEs have deferred, then the top heavy minimum is required. Therefore, I would include the accrued TH contribution as part of the account balances for 12/31/2000 for 2001 TH test.

If the plan is a non 401(k) profit sharing plan with a discretionary contribution, then the contribution could be 0 and no TH minimum would need to be contributed. Therefore, do not include the accrued TH contribution if the contribution is discretionary.

[Guest]

I am not 100% sure. talk #44 at the ASPA conference in 1998 said 'if contribution obligation is created on or before the determination date, such accrued contribution is generally included in the account balance' and examples of such are 'a minimum top heavy contribution as required by deferrals by key employees' also ' however, a minimum top heavy contribution triggered as a result of a profit sharing contribution which had not been declared by the end of the year would not be included'

but then 'a profit sharing contribution declared by the board of directors before the determination date' would be included.'so if a 3% contribution was 'declared' before hand, then maybe Yes.

unfortunately, all this info points to a footnote 'Rev Rul' but it is blank. (all the other footnotes are documented)

There is a rev rule 78-223 in an earlier footnote, so maybe that is it, or close the the rev ruling.

I'm still looking for the cite, if anyone else knows, I would like it!