Top-Heavy Clause Samples
The Top-Heavy clause is designed to address situations in retirement plans where a disproportionate share of benefits accrues to key employees, typically owners or highly compensated individuals. In practice, this clause requires the plan to meet certain minimum contribution or benefit standards for non-key employees if the plan becomes top-heavy, as defined by regulatory thresholds. Its core function is to ensure fairness and compliance with legal requirements by protecting the interests of rank-and-file employees and preventing excessive benefit concentration among key personnel.
Top-Heavy. If the Plan is top-heavy, the Employer will satisfy the Top-Heavy Minimum Allocation requirements in accordance with Article X.
Top-Heavy. Application of the top-heavy rules in Article X.
Top-Heavy. The Plan will apply the provisions of Article X separately to each Participating Employer. The Plan will be considered separate plans for each Participating Employer and its Employees for purposes of determining whether such a separate plan is top-heavy or is entitled to the exemption described in Section 10.05. For purposes of applying Article X to a Participating Employer, the Participating Employer and any business which is a Related Employer to that Participating Employer are the "Employer." For purposes of Article X, the terms "Key Employee" and "Non-Key Employee" will refer only to the Employees of that Participating Employer and/or its Related Employers. If such a Participating Employer's separate Plan is top-heavy, then:
Top-Heavy. The Plan is Top-Heavy for any Plan Year if any of the following conditions exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60% and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans.
(2) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of plans exceeds 60%.
(3) If this plan is part of a Required Aggregation Group and part of a Permissive Aggregation Group of Plans and the Top-Heavy Ratio for the Permissive Aggregation group exceeds 60%.
Top-Heavy. If this Plan is a Top-Heavy Plan for any Plan Year, the allocation formula in section 12.3(h)(1) shall apply in lieu of the formula in this section 6.3(a)(2) for such Plan Year.
Top-Heavy. Before completing this Section of the Adoption Agreement, the Employer should carefully read Article XV of the Basic Plan Document paying particular attention to Sections 15.03 thru 15.05. A-15.02 Minimum Top-heavy Allocations: The purpose of this Section A-15.02 is to coordinate Top-Heavy minimum contributions or benefits when two or more plans of the Employer are involved. If the Employer maintains only this plan, and has never maintained a Defined Benefit plan, the Employer is required to complete only Section (d). If the Employer maintains (or has maintained) a Defined Benefit plan, this Section should be completed only with the advice of that plan's actuary. If the Employer maintains two Defined Contribution plans, and has never maintained a Defined Benefit plan, the Employer is required to complete only Sections (c) or (d).
(a) If the Employer maintains a Defined Benefit plan, this Section or --------- - ------- ------- ---- Section
(d) below must be completed. If a non-key Employee participates in both a Defined Benefit plan and a Defined Contribution plan which are part of a Required Aggregation Group or a Permissive Aggregation Group and the Top-Heavy Ratio exceeds 60% (but does not exceed 90%), Top-Heavy minimum benefits shall be provided as follows:
(1) In the Defined Contribution Plan, with a minimum allocation of: [ ] (i) 5% of total compensation (Defined Benefit and Defined Contribution Fractions computed using 100% of the dollar limitation) [ ] (ii) 7.5% of total compensation (Defined Benefit and Defined Contribution Fractions computed using 125% of the dollar limitation)
(2) In the Defined Benefit Plan, with a minimum annual accrual of: [ ] (i) 2% of the highest 5 consecutive year average compensation (Defined Benefit and Defined Contribution fractions computed using 100% of the dollar limitation) [ ] (ii) 3% of the highest 5 consecutive year average compensation (Defined Benefit and Defined Contribution Fractions computed using 125% of the dollar limitation) If the Top-Heavy Ratio exceeds 90%, the minimum benefit shall be provided in:
(3) the Defined Contribution plan with a minimum allocation of 5% of total compensation. [ ] (4) the Defined Benefit plan with a minimum accrual of 2% of the highest 5 consecutive year average compensation Note: When the Top-Heavy Ratio exceeds 90%, the Defined Benefit and Defined Contribution Fractions shall be computed using 100% of the dollar limitation.
Top-Heavy. Top Heavy Plans
1. Plan to which Top-Heavy allocations are made:
i. [ ] This Plan
ii. [ ] Pursuant to the terms of another plan
2. If H.1.ii (another plan) is selected, name of other Plan to which Top-Heavy allocations are made:
3. If H.1.i (This Plan) is selected, type of other plan maintained by the Company that covers employees eligible to participate in this Plan:
i. [ ] N/A - No other plan ii. [ ] Defined Contribution
Top-Heavy. The status of the Plan in any Plan Year, as set forth in section 12.2.
Top-Heavy. As of the last day of each Plan Year, a determination --------- will be made on whether this Plan is top-heavy as described in Section 13.9 and, if this Plan is top-heavy, the Employer Companies will contribute such amounts, if any, as are necessary to satisfy minimum top-heavy allocation requirements. Any such contributions will be credited as of the last day of such Plan Year to the affected Participants' Employer Company Account.
Top-Heavy. Before completing this Section of the Adoption Agreement, the Employer should carefully read Article XV of the Basic Plan Documents paying particular attention to Section 15.03 thru 15.05.