Is it permitted to have allocation conditions on the top-heavy minimum contribution?

The correct answer indicates that it is not permissible to impose hours requirements on the top-heavy minimum contribution. Under IRS regulations regarding top-heavy plans, the minimum contributions required for participants in a top-heavy plan must be made to all eligible non-key employees, and these contributions must not be contingent on meeting certain allocation conditions like hours of service.

The rationale behind this rule is to ensure that all eligible employees, irrespective of their hours worked, receive their minimum contributions in a top-heavy scenario. This reflects the intention of the law, which aims to protect the retirement benefits of non-key employees, who are generally more vulnerable in top-heavy plans.

The incorrect options suggest conditions that could be placed on the top-heavy minimum contributions. However, these options misinterpret the implications of top-heavy plan regulations, as no additional conditions such as hours worked or being a key employee can be applied to qualifying for the minimum contribution. Such stipulations would undermine the intended protective measure for non-key employees within top-heavy plans.