When more than 60% of a 401(k) plan’s assets belong to key employees, the plan is “top-heavy” — triggering a mandatory minimum contribution for everyone else, regardless of whether they deferred anything themselves.
How it works
The standard minimum is 3% of compensation, unless the highest contribution rate allocated to any key employee for the year is itself below 3% — in that case, the minimum drops to match that lower rate.
What this does not include
This does not include the determination of top-heavy status itself (the 60%-of-assets test), or which specific contributions (employer nonelective, matching, QNECs) can be counted toward satisfying the minimum — it assumes top-heavy status has already been established.
How to use this calculator
- Enter non-key employee compensation and the highest contribution percentage allocated to any key employee.
Frequently asked questions
Who counts as a “key employee”?
Generally certain officers above a compensation threshold, 5%+ owners, and 1%+ owners earning above a separate compensation threshold — the specific dollar thresholds are indexed annually.
Does a small startup 401(k) commonly become top-heavy?
Yes — plans where owners and a few highly compensated employees hold most of the balances (common in small companies with few rank-and-file participants) often trip the 60% threshold.
Can a safe harbor 401(k) avoid top-heavy testing entirely?
Certain safe harbor plan designs are exempt from the top-heavy minimum contribution requirement, though specific conditions apply depending on the safe harbor formula used.
