Expert: David M Iannopollo - 3/17/2008

Question
Dave,

Just this past year our 401k became top heavy, actually back in 2006, since it's a look-back test. Are there any alternatives to making the 3% contribution to all non-key employees?  Also, assuming there are no alternatives, the owner of our company will most likely choose to terminate our plan this year. Will we need to do another 3% contribution before the plan can be terminated, to bring it into compliance for 2007? Thanks in advance for your response.


Answer
Hi Gavin,
Yes, you will have to bring the plan into compliance  before closing it. However, there is a way to get around the top heaviness without switching to a safe harbor plan, which can be very expensive. It's rather in depth for this forum, but if you email me at the address below and give me your company size and what state you are in, I can supply you with more info. Thanks!

Dave
diannopollo@twcny.rr.com