As you may know, Section 416 of the Code penalizes a qualified plan that is "top heavy." A defined benefit plan is generally considered top heavy if the present value of the cumulative accrued benefits under the plan for key employees exceeds 60% of the present value of the cumulative accrued benefits of all employees. Similarly, a defined contribution plan is generally considered top heavy if the aggregate of the accounts of key employees exceeds 60% of the aggregate accounts of all employees. While many plan recordkeepers may perform top heavy testing, plan sponsors are responsible to ensure that the test is properly completed and passed. We encourage you to contact your recordkeeper or third-party administrator to ensure that top heavy tests are performed. If you perform testing internally and would like a "top heavy worksheet" prepared for your plan, please contact a member of the Employee Benefits and Executive Compensation Group.
Remember Top Heavy Testing
This article was edited and reviewed by FindLaw Attorney Writers | Last reviewed March 26, 2008
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