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Top-heavy retirement plans: the advantages of restoring balance
Ist Teil von
Journal of accountancy, 1985-03, Vol.159 (3), p.108
Ort / Verlag
New York: American Institute of CPA's
Erscheinungsjahr
1985
Link zum Volltext
Quelle
Business Source Ultimate (EBSCOhost)
Beschreibungen/Notizen
If key employees, defined as certain officers and shareholders, receive more than 60% of the accrued benefits of a qualified retirement plan, that plan is generally considered top-heavy. Five significant restrictions are imposed on top-heavy plans, and any of them can be material. If a plan is determined to be top-heavy, there are planning techniques that can be used to avert top-heavy tax status. These include: 1. rollovers into a new profitsharing plan from all non-key employees in the old plan, 2. encouragement of voluntary employee contributions to a plan by all except key employees, 3. asking key employees to waive contributions or benefits, 4. including more employees in the plan by lowering eligibility or hours-of-service requirements, and 5. increasing the front-end accruals of a defined benefit plan. The advantages of the qualified retirement plan for a closely held business make it important to avoid top-heavy status.