Compliance January 30, 2004

Top-Heavy Guidance Handed Down By IRS

January 30, 2004 (PLANSPONSOR.com) - Plan sponsors that are having difficulty determining if their retirement plans are subjected to the top-heavy rules of Internal Revenue Code (IRC) Section 416 have been given a bit of guidance.
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>The Internal Revenue Service (IRS) in Revenue Ruling 2004-13 provided four separate examples for plan sponsors to measure their own plans against in determining top-heavy susceptibility.   Every scenario is separately examined and ultimately a determination of the hypotheticals’ subjection to the Section 416 requirements is provided.

>The bottom line in the IRS’ analysis though was the ” determination of whether a plan is a top-heavy plan is made on a year-by-year basis.”   So even if the plan meets Section 416 requirements this year, that does not mean the same checks-and-balances do not need to be applied in the future.

A copy of Revenue Ruling 2004-13 can be found at http://www.irs.gov/pub/irs-drop/rr-04-13.pdf .

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