Provided by your plan administration partner:
TOP HEAVY REMINDER
Essential: Top Heavy Rules apply to any plan with
- Active contributions (Including Deferrals)
- Key Employees (usually owners and family of owners) total retirement plan balance exceeds 60% of the total Plan assets
If your Plan is, (or becomes - Top Heavy in 2009 is calculated on the 12-31-2008 balance) Top Heavy:
Top Heavy Requirement: Employer Contribution of 3% of Compensation to all Non-Key Employees employed at Year End.
OR
Top Heavy Restriction: No deferrals by Key Employees
No Employer Contributions on behalf of Key Employees
Elaboration:
See a Full Discussion of Top Heavy Rules from our April 2008 Newsletter.
Critical for 2008: Employers facing a slowdown in business or reduced profitability are increasingly indicating that they will not make any Employer Contributions for 2008. However, if the Key Employees have been making deferrals during the year, the Top Heavy contribution of 3% to all non-key participants is required. Employers may wish to start budgeting now, as the deposit is required by December 31st of the following year - 12-31-2009.
Critical for 2009: Employers who do not want to incur a 2009 contribution should follow the "Top Heavy Restriction" as outlined above and refuse deferrals by Key Employees for any payroll that is paid in 2009.
This may also be an issue for Safe Harbor plans that are adopting a "Wait and See" stance on the 3% Safe Harbor contribution for 2009. Plans using the Wait and See may wish to consider restriction of Key Employee deferrals until late in the year, when they make a decision as to whether they can make the contribution. Plans that have Key Employee deferrals deposited to the Plan in 2009 will require the 3% Top Heavy contribution, and therefore negate most of the benefits of using the Wait and See option.
We understand that these issues are confusing. If you have questions, please email helpdesk or call Customer Service.
Reach Customer Service at 858-748-6500 with questions
Plan Design 858-218-3440
Contact Us
In this Announcement:
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Innovative Pension
14251 Danielson Street
Poway, CA 92064
For Assistance,
Call Customer Service: 1.800.98PENSION
or email helpdesk