Betterment is not a tax advisor. The information provided in our Support Center is educational and should not be considered tax advice. Please consult a tax professional.
A plan is considered to be Top Heavy if Key employees’ accounts represent 60% or more of the overall plan’s total assets. If a plan is considered Top Heavy for the year, the employer may be required to contribute up to 3% of compensation on all non-Key employee accounts. This minimum contribution can be met via employer matching, profit sharing, or safe harbor contributions, but when these do not meet 3% of a non-Key employee’s annual compensation, additional contributions may be due. Safe harbor plans have the benefit of a deemed pass if the only contributions made are deferrals and safe harbor contributions (even if some employees did not receive a full 3% due to timing or matching contributions).
