Application of top-heavy rules to defined contribution plans covering excludable employees

Under current law, employers of a Top Heavy plan may be required to contribute 3% of pay to certain eligible employees, including those that became eligible prior to attaining age 21 and with less than 1 Year of Service. The new law will allow an employer to complete Top Heavy testing by separating employees who have not attained age 21 and worked 1 Year of Service from the rest of the plan participant base. This change may reduce the burden to employers by eliminating the need to make a top-heavy contribution to the plan on behalf of these participants, and this could increase retirement plan coverage to more workers as earlier/younger entrants may not adversely affect plan testing.