DC Plan Issues: Minimum DC Allocation for Top-Heavy Plan (Posted October 22, 2001) Technical Tip 59: The following question and answer appeared in "The Gray Book" (Questions to IRS/Treasury and Summary of Their Responses) from the 2001 Enrolled Actuaries Meeting: Plan A is a calendar year top-heavy defined contribution plan that covers employees of divisions X, Y and Z. Employees of division Z will no longer be covered by Plan A beginning on January 1, 2001, but the plan will continue to satisfy the nondiscrimination rules under IRC §410(b) and §401(a)(4). Thus, no new employees of division Z will be eligible to become plan participants. Must those employees of Division Z who were already participating in Plan A continue to receive top-heavy contribution allocations? If, instead, Plan A were a defined benefit plan, would employees of Division Z who were already plan participants continue to receive top-heavy benefit accruals? Response: Employees of Division Z who are participants in Plan A must continue to receive top-heavy minimum contributions (or benefit accruals in the case of a defined benefit plan) as if the plan had been amended to suspend further contributions or benefits. However, no such additional contributions or accruals will be required if the assets and liabilities with respect to employees who are participants in Plan A are spun off to a separate plan, such separate plan is not top heavy, has no key employees and is not aggregated with Plan A to satisfy the IRC §410(b) or 401(a)(4) nondiscrimination rules. View all Tips © 2012 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.