What happens if the plan is Top-Heavy?
A minimum contribution to nonkey participants of up to 3% may be required if any key employee receives a contribution of up to 3%. All participants who are employed on the last day of the year must receive this top-heavy minimum regardless of the number of hours they work. In a defined benefit pension plan, a minimum accrual of 2% per year up to a maximum of 20% is the minimum benefit that is required. Any participant who works 1,000 hours in the plan year accrues this top-heavy minimum benefit. A top-heavy plan must also have a vesting schedule that is at least as fast as 20% per year starting with the second year of service (100% after six years) or in the alternative, 100% after three years of service.
