What Is Top Heavy?
What makes a plan Top Heavy?
When at least 60% of plan assets are held in balances of Key Employees.
What is a Key Employee?
- A 5% owner
- A 1% owner, having compensation over $150,000
- An Officer receiving more than $150,000 in compensation
What are the risks with having a Top Heavy Plan?
If a plan is Top Heavy and does not take corrective action, it can lose it’s qualified status.
What are solutions to fix a Top Heavy plan?
A Qualified Non-Elective Contribution (QNEC) to eligible employees who have an insufficient allocation.
Monitor the balances throughout the year and consider adjusting contributions of the Key Employees.
Convert the plan to a Safe Harbor format.