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Top-Heavy Minimum Contribution Calculator3 Percent or Highest Key Rate

What do these figures come to once the work is shown?

Required employer contribution for a non-key employee in a top-heavy plan and the shortfall against what has been allocated.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Shortfall to contribute
$660
Required minimum rate
3.00%
Required minimum contribution
$1,560
Drawn to one scale
Shortfall to contribute$660
Required minimum contribution$1,560
Already allocated$900
All results
MeasureResult
Shortfall to contribute$660
Required minimum rate3.00%
Required minimum contribution$1,560
Already allocated$900
How this was worked out
Work shownrecomputed as you type
Required rate = lesser of 3% and the highest key employee contribution rate for the year
Required contribution = required rate x non-key compensation
Shortfall = required contribution - employer contributions already allocated, including matching contributions

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Required rate = lesser of 3% and the highest key employee contribution rate for the year
  • Required contribution = required rate x non-key compensation
  • Shortfall = required contribution - employer contributions already allocated, including matching contributions

How it works

Under section 416(c)(2)(A), a top-heavy defined contribution plan must provide each non-key participant an employer contribution of at least 3 percent of compensation. Employer matching contributions count toward that minimum.

Under section 416(c)(2)(B), if the highest contribution rate for any key employee for the year is below 3 percent, the minimum is that lower rate. Under 26 CFR 1.416-1, Q&A M-7, the test is met by the contributions and forfeitures allocated to the non-key employee's account.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Do the non-key employee's own deferrals count?

No. The minimum is an employer contribution; elective deferrals of non-key employees do not satisfy it.

Do key employee deferrals count when finding the highest key rate?

Yes. Key employees' elective deferrals are counted in their contribution rate for this purpose.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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