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What is meant by the term top-heavy in retirement plan testing?

A status that indicates the plan is dominated by key employees and triggers related requirements.

Top-heavy testing looks at how retirement benefits are distributed among participants, focusing on whether a small group of key employees holds a large share of the plan’s value or benefits. If those key employees dominate the plan, it’s considered top-heavy. That status triggers additional requirements to protect non-key participants, such as minimum contributions or minimum benefit allocations for eligible non-key employees and changes to vesting rules to ensure fair treatment. It’s not about the number of participants, and it doesn’t mean there’s no nondiscrimination testing—the top-heavy designation actually brings extra rules to ensure non-key participants receive adequate benefits.

A plan with the smallest number of participants.

A plan that primarily offers health benefits.

A plan that has no nondiscrimination testing.

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