Top Heavy Contributions for Deferral Only Participants (Posted August 22, 2003) Technical Tip 103: The following question and answer were from the IRS Q&A Session at the 2002 ASPPA Annual Conference: If a plan allows immediate entry for 401(k) deferral purposes only, and requires a year of service and last day of the plan year for match and profit sharing, must these early entrants (i.e., before one year of service and entry date) receive a top-heavy contribution even though participants only for 401(k) deferral purposes? Response: Yes. Comment by the RLR&C ERISA Attorneys: The IRS answer is supported by Treas. Reg. section 1.416-1 M-10. That regulation states that all non-key employees who participate in defined contribution plans, and who have not separated from service by the end of the plan year, must receive the top-heavy minimum allocation. This is true for non-keys who initially satisfy a plan's eligibility requirements but who subsequently fail to complete the required hours during an accrual computation period (for example, 1000 hours in a plan year), as well as those who do not make elective contributions. Thus, once an employee meets the initial requirements for participation for deferral purposes, he is entitled to a top-heavy allocation for that year (and subsequent years, until he separates from service). View all Tips © 2009 Reish Luftman Reicher & Cohen, a Professional Corporation Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation.