Definitions for "Top-heavy plan"
Beginning in 1984, a plan that primarily benefits key employees is considered top-heavy and qualifies for favorable tax treatment only if, in addition to the regular qualification requirements, it meets several special requirements.
This plan provides benefits for key employees, such as officers or owners of the company, that are worth more than 60 percent more than the benefits offered to regular employees. A top-heavy plan may require shorter vesting periods for regular employees to balance things out. See " vesting."
In the United States, a pension plan or employee-benefit plan which provides more than 60% of its accrued benefits to the owners, executives or most highly paid employees of a company (known as key employees). To remain qualified, a top-heavy plan must provide certain minimum benefits to nonkey employee participants. See also key employee. | Back