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Salary-only Deferral Contributions - 401K

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Not wanting to make employer contributions to a qualified plan, Jack Thrifty establishes a 401(k) plan for his small business that permits only salary-deferral contributions by participants. Which of the following statements concerning the plan is (are) correct?

I. The employer cannot be required to make top-heavy required contributions to the plan, because the plan only involves salary deferral contributions by participants and does not provide for any employer contributions.
II. The employer would not have to be concerned about top-heavy vesting schedules because participants' pre-tax salary deferral elections in a 401(k) must be 100 percent vested at all times.

A. I only
B. II only
C. Both I and II
D. Neither I nor II

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Solution Summary

This solution provides the correct answer with explanation to the deferral contribution question listed.

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You're correct, both statements are false.

The top-heavy issue is thoroughly discussed ...

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