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401k Plans
Normally, a 401(k) plan does not require any employer contribution. However, if the plan becomes top heavy, then an employer contribution of, as much as, 3% of compensation may be required.

A top-heavy plan is a plan in which 60% of the adjusted benefits/assets belong to key employees. Generally, a key employee is an employee who meets one of the following criteria:
  1. An officer earning $165,000 (as adjusted for inflation) or more;
  2. More than 5% owner (including family members of a 5% owner); or
  3. A 1% owner earning $150,000 or more.
If a key employee defers into the 401(k) plan when it is top heavy, the employer is required to make a top heavy minimum contribution for all non-key employees who are active participants in the plan at year-end. The top heavy minimum is the lesser of 3% of compensation or the highest percent of contribution to a Key Employee.

A profit sharing or safe-harbor contribution of at least 3% of pay will satisfy the top-heavy minimum. Matching contributions may also count towards the top-heavy minimum.

A 401(k) safe harbor matching plan is deemed to satisfy the top heavy minimum requirement if the only allocations to plan participants are contributions of 401(k) and safe harbor match.

Attention Silicon Valley, Internet, or other start-up companies: Employees who have stock options are considered to own the stock for which they have vested options. This applies regardless of whether the employee exercises the option.

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