If an employer maintains more than one plan, what must they do for determining top-heavy status?

Determining the top-heavy status of qualified retirement plans is an important compliance requirement, especially when employers maintain multiple plans. When it comes to assessing whether a plan is considered top-heavy, the regulations specify that employers must aggregate plans that are part of a required aggregation group.

This means that when evaluating the defined contribution plans, any plans that are legally connected—such as those that share common ownership, or are part of a controlled group of companies—must be analyzed together. The rationale behind aggregating these plans is to ensure that the benefits provided to key employees are not disproportionately favored when compared to non-key employees across all plans within that group.

Thus, evaluating plans in isolation could lead to incorrect conclusions about their status regarding top-heavy rules. Aggregating the plans offers a more holistic view, ensuring compliance with the regulations intended to promote fairness and equity among all employees covered by the plans.

By determining the top-heavy status in this way, employers can take necessary actions if any of the aggregated plans are found to be top-heavy, such as providing minimum benefits or contributions to non-key employees, thereby fostering compliance and equity in retirement benefits.