Top-heavy and catch up

401k plan is TH.  Owner is over age 50.  

Owner does NOT want to make any employer contribution to the plan for plan year.

I assume the owner cannot just make a $6500 deferral for the year without triggering the top-heavy minimum to the non-key employees.  I assume there is no way to classify a $6500 deferral as catch-up only and thus avoid TH minimum because the plan would not fail ADP or violate 415 or 402(g).  

Just wanted to confirm. 

If the Plan has $0 deferral limit for HCEs written into the plan document but allows for catch-up contributions your can probably get away with it. But no you can't just call the first $6,500 catch-up because you want to as it helps you out.

I agree with Lou that a $0 plan-imposed limit on deferrals for HCEs will accomplish what you want. If we're talking about 2022 then amend the plan now to put the limit in, as long as no HCE has already contributed more than $6,500.

If we're talking about 2021, and the owner already contributed $6,500 then you are probably out of luck. One exception might be if none of the NHCEs deferred, because then the ADP maximum for HCEs would be 0%, so the HCE would have to take a refund of his entire contribution, which would then be reclassified as catch-up, which would then not trigger the top heavy minimum. It's ironic that NHCEs contributing less actually yields a better result for the owner in this case.

I think there is an argument to be made that you can set up that same result intentionally, even if NHCEs deferred, by shifting all NHCE deferrals to the ACP test. The ACP test will pass both before and after the contributions are shifted - since the HCE ACP would be 0% in both cases - and once they are shifted, the remaining NHCE ADP is 0%, causing all of the HCE's contribution to be reclassified as catch-up.

Mind you, this is just my pet argument and I have no idea if it would actually hold up if challenged. Amending the plan to put in a $0 limit for HCEs is a much safer and cleaner approach.

I recall reading somewhere in the past that a $0 deferral limit for HCE's will also not allow any catch-up... since the catch-up is a "deferral which would not be allowed with a $0 limit".

The EOB says that's, well, undetermined as yet.

13 hours ago, chc93 said:

I recall reading somewhere in the past that a $0 deferral limit for HCE's will also not allow any catch-up... since the catch-up is a "deferral which would not be allowed with a $0 limit".

Then put in a limit of $0.01 instead.

This also could blow up if the HCEs haven't gotten to 6,500 yet but are 1973 or later births.

Key Employees.  Not HCEs.

An amendment to the contribution limit would probably be effective 1/1/23.  So, the Keys should know ahead of time whether or not they can contribute.

If owner doesn't want to contribute for employees and employees don't contribute enough to let owner benefit much then why have the plan? Dump the plan, have owner do an IRA max and move on. If you wanna dance, pay the piper or get off the dance floor.