When considering top-heavy status, which of the following is true regarding aggregation?

Evaluating plans for top-heavy status requires that all defined contribution plans maintained by a controlled group are aggregated. This approach ensures that the overall benefits and contributions provided across all plans are considered together, allowing for a comprehensive assessment of whether the plans collectively meet the threshold that designates them as top-heavy.

When plans are aggregated, it is possible to look at total assets across all plans maintained by the employer or controlled group, which can change the determination of whether a plan is top-heavy based on the combined assets, rather than evaluating each plan in isolation. This aggregation helps in ensuring compliance with the requirements set forth by the Internal Revenue Service regarding retirement plans.

This collective evaluation aligns with regulatory intent, as it prevents employers from circumventing top-heavy rules by simply maintaining smaller plans without recognizing their broader implications. Therefore, understanding that plans must be evaluated in conjunction is crucial for accurate compliance with the top-heavy provisions.