Is it true or false that if a required aggregation group's top-heavy ratio exceeds 60 percent, every plan in the group is considered top-heavy?

In the context of 401(k) plans, the concept of "top-heavy" refers to whether a plan disproportionately benefits key employees, which could potentially violate certain regulatory guidelines aimed at ensuring fairness in retirement savings. When evaluating whether a plan is considered top-heavy, all plans within a required aggregation group are analyzed together.

If the overall top-heavy ratio of a required aggregation group exceeds 60 percent, it indicates that over half of the accrued benefits in the group are allocated to key employees. When the top-heavy ratio surpasses this threshold, it is established that every plan within that group must be treated as top-heavy. This means that all plans in the aggregation group will need to adhere to the minimum contribution requirements that apply to top-heavy plans, impacting the plan design and funding obligations.

This understanding is rooted in ensuring compliance with the provisions established under the Internal Revenue Code for retirement plans. By maintaining this threshold, the regulations help protect the interests of non-key employees and encourage equitable participation in the plans within the group.

Thus, the statement is indeed true; exceeding a 60 percent ratio in any required aggregation group necessitates that every plan in that group is considered top-heavy.