Tax Facts

3921 / Are there simplified calculation methods for a top-heavy plan?



Precise top-heavy ratios need not be computed every year so long as the plan administrator knows whether or not the plan is top-heavy. For this purpose, and for the purpose of demonstrating to the IRS that a plan is not top-heavy, an employer may use computations that are not precisely in accordance with the top-heavy rules but that mathematically prove that the plan is not top-heavy. Several such methods are provided in the regulations.1






1.  Treas. Reg. § 1.416-1, T-39.

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