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Plan amended during Plan year to stop safe harbor match -how does that affect Top Heavy?


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Posted

A retirement plan was operating as a safe harbor plan - until they amended their plan as October 21, 2018  to no longer make the safe harbor match.   Do they have to be tested for non-discrimination-- as in the ADP/ACP test for 2018?  I think so, but just want confirmation.  Also, when the top-heavy test is run, it shows that 74% of the account balances belong to the key employees at 12/31/2018.  Do they have to make a top contribution for 2018 or  2019 since they were a safe harbor plan as of 12/31/2017?    Thanks!

Posted

They lose the get out of top heavy free card for 2018. So if the TH ratio on 12/31/17 was more than 60% they have to satisfy TH minimum contributions for 2018.

They lose the ADP/ACP free pass too, have to test for 2018.

Since they are at 74% on 12/31/18 - they are TH for 2019.

It's a bit too late now but given the facts the client should probably have been advised to keep the safe harbor through 12/31/18 and remove it for 2019 while also informing them of the TH nature of their plan and the implications.

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