Top-heavy plan
Certified Financial Planner glossary · Certified Financial Planner
Definition
A plan in which key employees hold more than sixty percent of benefits, triggering minimum contributions and accelerated vesting.
Top-heavy plan in plain English
Key employees already hold most of the account balances, and the plan is about to owe minimum contributions to the rank and file. A top-heavy plan is one in which key employees hold more than sixty percent of benefits, triggering minimum contributions and accelerated vesting. Sixty percent is the bright line. Do not confuse top-heavy testing with ADP/ACP safe harbor relief; a plan can face top-heavy duties even when other tests are handled. Watch for accelerated vesting as a second consequence, not only the minimum contribution.
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