IRS Revenue Ruling 2004-13 clarified when a 401(k) safe harbor plan is to be exempt from being top heavy.
Rev. 11/16/07, E-mail Alert 2007-15

This ruling clarifies when a safe harbor plan is exempt from being top heavy and when it is not. If a safe harbor 401(k) plan has only elective deferrals and the safe harbor match contribution, it is exempt from being top heavy.

If a safe harbor 401(k) plan provides for elective deferrals and the safe harbor match contribution, and it has a provision for a discretionary nonelective contribution, but does not make a discretionary nonelective contribution, it is exempt from being top heavy for that year.

The clarification is made that the exemption from being top heavy is made on a yearly basis.

When is a safe harbor 401(k) matching contribution plan not exempt from being top heavy?

• When the employer makes a discretionary nonelective contribution.
  
  
• When forfeitures are allocated to participants' accounts in the same manner as nonelective contributions.
  
  
• When employees are eligible to make elective deferrals upon hire but are not eligible for the match until after one year of service is completed.